Reasons for using mezzanine capital

The choice to request mezzanine capital has many advantages. However, you need to be patient and wait for a while.

Advantages:

• It fills a financial gap and provides a capital base to carry out corporate projects
• Improves the balance sheet structure and therefore solvency (positive impact on the company’s rating and financial margin)
• Consolidation of financial equity (no dilution of capital or loss of property rights)
• Interest is tax deductible
• Flexible credit arrangement
• Greater entrepreneurial freedom and the right of the lender of the mezzanine capital to intervene

Disadvantages:

• Higher costs compared to traditional loans
• In terms of equity, the capital is only made available with a time delay
• Greater transparency requirements

Characteristics of mezzanine capital

It is worth comparing the properties of mezzanine capital with those of equity or traditional loans. Here is an overview.

Source: Credit Suisse Economic Research