Mezzanine Loan Calculator
How to Use our Mezzanine Loan Calculator
Welcome to our Mezzanine Loan Calculator – your go-to tool for estimating potential Mezzanine Financing for Business Acquisitions and other commercial endeavors. We’ve built this calculator for you to explore different financing scenarios, helping you make informed decisions about your financial needs. If you haven’t explored our Mezzanine Loan Calculator already, let us show you how to use it:
1. Input Your Financial Details:
Total Asset Value ($): Enter the total value of your assets. These could include real estate properties, equipment, and other valuable holdings.
Senior Loan Amount ($): Input the amount of the primary loan secured by your assets.
Equity Investment ($): Provide the equity contribution you plan to invest in the project.
Mezzanine Loan Ratio (%): Enter the percentage of the asset value that can be borrowed as a mezzanine loan.
Interest Rate (%): Input the interest rate you expect to pay on the mezzanine loan.
Repayment Schedule (in Years): Specify the repayment schedule you’re considering for the mezzanine loan. For instance, you might enter “10 years” if you plan to repay the loan over a decade.
Mezzanine Loan Type: Select the type of mezzanine loan you’re interested in: “Unitranche,” “Senior Secured,” or “Subordinated.”
2. Personal and Business Information:
Borrower’s Credit Score: Enter your credit score. This helps us estimate your eligibility for the loan.
Debt-to-Income Ratio: Input your debt-to-income ratio, which aids in assessing your financial capacity.
Years of Experience in Business: Provide the number of years you’ve been involved in your current business or industry.
3. Calculate Your Mezzanine Loan:
Click on the “Calculate” button to process the information you’ve entered. The calculator will then estimate the potential mezzanine loan amount, interest rate, repayment schedule, and total cost based on your inputs.
4. Interpret the Results:
The calculator will display your potential mezzanine loan details, including the loan amount, interest rate, repayment schedule, and total cost. This information helps you understand how different factors affect your financing options.
5. Additional Considerations:
Below the results, you’ll find a section labeled “Additional Considerations.” This provides you with essential insights into mezzanine lending, eligibility criteria, fees, and personalized advice. Make sure to review these points before making any decisions.
6. Disclaimer:
Don’t forget to read the disclaimer at the end of the Mezz Loan Calculator. This reminds you that the calculator’s results are for informational purposes only and encourages you to consult qualified financial advisors or loan lenders for personalized guidance.
That’s it! That was your first step to check your eligibility before applying for a Mezz loan from Mezzanine financing companies or Mezzanine Lenders.
Our Mezzanine Loan Calculator can be used literally from anywhere, anytime, without having to call your Bank’s Customer Service with those endless hold times or even having to visit the Bank personally during your busy workday.
While exploring the options for mezzanine loans from Mezz Lenders, it is critical to use this calculator to get a ballpark figure so as to go prepared into the discussion with them.
While our calculator covers it all and will technically set you up for success, it is critical you get into an in-depth conversation with your Financial Advisor.
Benefits of MyTrueMirror's Mezzanine Loan Calculator
Looking for ways to finance your small business with a Mezzanine Loan? Be it, Mezzanine in Finance or Mezzanine in Real Estate, we’ve got you covered, so no worries!
Our Mezzanine Loan Calculator covers all of these scenarios across industries, so really, there’s so much more for you to explore that we’d love to host you each time you need any information about Mezzanine finance!
Planning on a large expansion by acquiring a business? or getting into the commercial real estate side to expand your portfolio of assets and investments? Need some line of credit for your mid-sized business? or planning on bridging the gap of the working capital?
Be it any of these, your business, your baby, should always function and not be hindered by these trivial issues. Notice how we call these “Trivial” issues? Absolutely, they indeed are “Trivial”!
There’s just been so noise and hype around Finance as a subject that this seems to be the end of the world for you, and many of us who’ve hit this phase of their Business journey are being dissuaded by this misconception that Mezzanine Debt (or any form of debt, for that matter) is harmful and that we should stay away from it.
While we do agree with them partially (because too much of debt can adversely impact the credit profile of the organization), we also believe that supplementing the finances by applying for a Mezzanine Debt isn’t a bad idea.
Primarily, because the finances/loan amount received from these combined set of Debt and Equity instruments (Mezzanine Loans), it would rather act as a great alternative to fund existing projects. After all, it would only help boost the business’ growth while strengthening their financials.
So, this is the sole reason we’ve built this mezzanine bridge loan calculator so as to help you and other businesses check the eligibility and the qualified loan amount before starting the process of mezzanine financing for business acquisition.
This holds true even for commercial real estate transactions, because ultimately, the first step will always be to check and make sure your business qualifies for a business line of credit and our Mezzanine loan calculator can go a long way to get you your estimates beforehand.
So, don’t forget to bookmark this page and return to it when you or one of your Golf buddies are out Golfing and one of you brings up a discussion of the company they plan on acquiring and that they would need to consider Mezzanine finance to fund the acquisition or even better, use Mezzanine lending to earn from the Equity and Debt rewards that come with it to the Mezzanine lender.
That’s the key here, our Mezzanine Calculator can be accessed from your browser for free, without having to have your secretary dial your Banker, saving your business time and effort for a menial, yet undeniably important task.
If you have any questions or require further assistance, our team is here to help, so please feel free to reach out to us at [email protected]
Remember, this tool is designed to give you estimates, but your final loan terms may vary based on Mezz lender’s policies and market conditions.
Start your journey towards informed financing decisions today with our Mezzanine Loan Calculator and Good luck with your endeavor!
What is a Mezzanine Loan?
A Mezzanine Loan, also known as Mezzanine Financing or a Mezz Loan, is a hybrid form of debt and equity financing used by companies seeking capital for growth and/or expansion. It is a financial instrument that falls between senior debt (traditional bank loans) and equity financing (e.g., issuing stocks in an Initial Public Offering – IPO). Sounds Familiar?
Yeah… The large companies that sometimes disappear with hoards of cash belong to this group of loans :-), and therefore, are pretty risky for the lenders. Just kidding 🙂 No pun intended!
Mezzanine loans are typically utilized by companies considered too risky for conventional bank loans and are not yet prepared for an IPO. While some small businesses can leverage the power of a secured line of credit, there are some that just cannot tap into the traditional, secured line of credit, despite their robust expansion plans because of the risk associated with their overall business standing.
Therefore, majority of our small businesses resort to Business Working Capital Loans from the top Mezzanine Lenders in Real Estate or Finance to drive the planned growth.
With me so far?
Great! Let’s continue…
Mezzanine Financing is characterized by a few key features listed below:
- Subordinated Debt: Mezzanine loans are subordinate to senior debt. In the event of a default, they are paid back only after senior debt holders have been fully repaid. Wondering what Senior Debt is? Don’t worry, we will soon have it here, so don’t forget to check back in a few days. You can also leave your email address below so we can contact you once it is up for you to read.
- Higher Interest Rate: Now, wasn’t this obvious? Lenders of mezzanine loans demand a higher interest rate compared to senior debt, compensating for the additional risk they assume.
- Equity-like Features: Mezzanine loans come with warrants or other equity-like features which is what makes them so versatile. It provide lenders with the option to convert their loan into equity in the company, usually at a predetermined price which is why we call these types of Loans “The Shark Tank Loans” 🙂 Just kiddin’… Wanted to lighten you up a bit! Did I succeed?
Let’s return to our topic and sum it up – Mezzanine loans are often used to finance business acquisitions, finance commercial real estate, growth projects, or leveraged buyouts. They can indeed be an attractive source of funding for companies that need capital to fuel their expansion plans.
However, it’s important to note that mezzanine loans carry higher risks compared to senior debt, making careful evaluation of the risks and rewards is essential before considering Mezz Financing option.
What is a Mezzanine Loan in Real Estate
So, let’s say you’re gearing up for a big-league move in the real estate game—a high-end apartment complex or a buzzing retail hotspot, for instance. You’ve got some cash saved up for the venture, and you’ve also snagged a regular loan from a bank to cover a good chunk of the expenses. But here’s the twist: there’s still a gap between what you’ve got and what you really need to make this dream a full-on reality. And this is where mezzanine loans step into the spotlight.
Alright, so what’s the deal with mezzanine loans, you ask? Well, think of them as the turbo boosters for your project. They’re like extra cash you can get on top of your main bank loan and the money you’ve already put in. Mezzanine loans act as the secret sauce that amps up your project’s potential.
Here’s the thing, though: these loans come with a bit of a kicker. They usually tag along with higher interest rates compared to your regular bank loan. Why, you might wonder? Because they’re a tad riskier for the lender. Mezzanine lenders are basically the adrenaline junkies of the finance world. They’re willing to take a gamble to see your project shoot for the stars.
So, the nutshell version: mezzanine loans are your smart solution for bridging that funding gap in your real estate venture. They’re like the bridge that brings together what you’ve got and what you need to make your real estate dream come true. So, next time you’re plotting out your grand real estate venture, remember that mezzanine loans might just be the key to unlock your success.
How do Mezzanine Loans Work? - End to End Process
Let’s now understand the entire process of how Mezzanine Loan works so as to get a 360-Degree understanding of this subject:
When a small business is looking for additional funding for purposes such as business acquisition, working capital, or property development, they consider mezzanine financing. As you already know, getting working capital business loans and/or small business secured line of credit is not an option for all small companies, in which case, they turn to Mezz Lending as one of their go-to options.
Identifying a Mezzanine Lender: Once they’ve concretized the need, the business then researches and identifies suitable top and best mezzanine financing companies or lenders that specialize in providing Mezz Debts/Mezz financing. From a list of mezzanine lenders, the business then narrows them down for a final consideration.
Application and Evaluation:
Once they’ve internally come up with a financing strategy and their acceptable terms, they then start the process of applying for a Mezzanine Loan:
a. Requirements: The company reviews the mezzanine lender’s specific requirements for obtaining a mezzanine loan. While each lender has their own TnCs, they all do often include a decent track record, a solid business plan, and the ability to demonstrate future cash flow potential.
b. Financials: The borrowing company then compiles with detailed financial statements, including income statements, balance sheets, and cash flow projections because these documents are crucial for the Mezz lender to assess the business’ financial health and repayment capacity.
Negotiation and Due Diligence:
a. Loan Terms: The business and the lender engage in negotiations regarding the terms of the mezzanine loan. This includes discussions about the loan amount, interest rates, repayment schedule, and any associated fees, which BTW vary depending on the type of loan (Unitranche, Senior Secured, and Subordinated).
b. Due Diligence: The lender performs a thorough due diligence process, which involves assessing the business’s industry, management team, competitive position, and growth potential. This step helps the lender determine the level of risk involved.
Structuring the Loan:
a. Unsecured Nature: Mezzanine loans are unsecured, which means they are not backed by specific collateral. However, lenders may incorporate warrants or equity kickers as a form of security.
b. Risk Assessment: Due to the higher risk associated with mezzanine loans, lenders usually charge higher interest rates compared to traditional loans.
c. Subordination: Mezzanine loans are subordinated to senior secured debt, meaning they are repaid after senior lenders in case of bankruptcy or liquidation.
Finalizing the Loan Agreement:
a. Legal Documentation: Once the terms are agreed upon, the business and the lender create a detailed loan agreement. This document outlines the terms, conditions, repayment schedule, interest rates, and any covenants.
b. Equity Conversion: In some cases, the lender might include provisions for converting the debt into equity if certain conditions are met. This gives the lender the option to become an equity owner in the business.
Loan Disbursement and Usage:
a. Funding: After the loan agreement is signed, the lender disburses the funds to the business. The business can then use the funds for the intended purpose, whether it’s acquiring another business, boosting working capital, or funding property development.
Repayment and Exit Strategy:
a. Repayment: The business begins making regular interest payments and follows the agreed-upon repayment schedule. These payments help cover the interest charges and reduce the outstanding loan amount.
b. Exit Strategy: Mezzanine loans are often structured with a clear exit strategy, which could involve refinancing, selling the business, or generating enough cash flow to repay the loan.
In summary, obtaining a mezzanine loan involves a comprehensive process, from identifying the need for funding to negotiating terms, conducting due diligence, finalizing the loan agreement, and managing repayment. Businesses must meet specific requirements and provide detailed financial information to secure this type of financing, which serves as a bridge between traditional loans and equity financing for various business purposes.
What Happens When You Default on Mezzanine Loans?
Now, let’s talk about what happens if things don’t go as planned and you can’t keep up with your payments. That’s called defaulting. It’s like missing a bunch of rent payments on your apartment but on a much bigger scale.
If you default on your mezzanine loan, it’s not great news. The lender who gave you that extra-extra money is now in a pickle. They’re at a higher risk because they’re the last ones in line to get paid back. The main bank lender and the equity partners are ahead of them in the line. So, the mezzanine lender might have to wait a while, and they might not get all their money back.
But here’s the kicker: sometimes, if you default, the lender might not just wait around. Before you even get the mezzanine loan, they might have negotiated an agreement that if you can’t meet your obligations, they can take a specific percentage of the equity you initially invested in the project. In simpler terms, they get a portion of your ownership as a way to make up for what you owe them. It’s like sharing a slice of your project with them right from the start.
Top 10 Mezzanine Finance Providers
After having consulted your Business Consultant, have you decided to explore the Mezz Loan route? Otherwise, why would you even be on this page calculating your Mezzanine Loan Qualification, right?
Great! Let’s proceed with your first step in this Mezzanine Loan journey!
Expansion is always a growing pain and while the rewards of expansion outweigh the challenges we often face while striving to take the business to the next level, there are several options available to small businesses and for that matter, even medium-sized companies to tap into during any of the phases of expansion, be it acquisitions or a real estate transaction.
One such option that is seldom spoken about is Mezzanine Loans which can work wonders if you are trying to arrange for working capital loans for a small business. Now that you’ve already understood the concept of Mezz loans from the topics discussed above, let us now look at the Top 10 Mezzanine Finance Providers (Mezzanine Financing Companies a.k.a Mezz lenders) for you to consider with their website links:
**Please note – this list of Mezzanine Finance providers is in no particular order, and have been solely listed based on our research. Neither do we get any affiliate commissions from any of these Mezzanine Providers.
1) Edgewood Capital is a private equity firm that provides mezzanine financing to middle market companies in the United States. The firm has over $1 billion in assets under management and has funded over 100 companies since its inception in 2000. Edgewood Capital is known for its flexible lending terms and its willingness to work with borrowers who have limited or no access to traditional bank financing.
2) NewSpring Capital is a private equity firm that provides mezzanine financing to growth-oriented companies in the United States. The firm has over $6 billion in assets under management and has funded over 300 companies since its inception in 1997. NewSpring Capital is known for its deep industry knowledge and its ability to provide borrowers with the capital they need to grow their businesses.
3) Prime Commercial Lending is a commercial real estate lender that provides mezzanine financing to borrowers in the United States. The firm has over $1 billion in assets under management and has funded over 500 projects since its inception in 2004. Prime Commercial Lending is known for its fast and efficient lending process and its competitive interest rates.
4) Golub Capital is a specialty finance firm that provides mezzanine financing to middle market companies in the United States. The firm has over $10 billion in assets under management and has funded over 700 companies since its inception in 2001. Golub Capital is known for its flexible lending terms and its ability to provide borrowers with the capital they need to grow their businesses.
5) Great Lakes Capital is a private equity firm that provides mezzanine financing to middle market companies in the United States. The firm has over $1 billion in assets under management and has funded over 100 companies since its inception in 2002. Great Lakes Capital is known for its deep industry knowledge and its ability to provide borrowers with the capital they need to grow their businesses.
6) Apollo Credit is a credit investment firm that provides mezzanine financing to middle market companies in the United States. The firm has over $20 billion in assets under management and has funded over 500 companies since its inception in 2005. Apollo Credit is known for its strong track record of performance and its ability to provide borrowers with the capital they need to grow their businesses.
7) Ares Management is a global alternative investment firm that provides mezzanine financing to companies in the United States and around the world. The firm has over $100 billion in assets under management and has funded over 1,000 companies since its inception in 1997. Ares Management is known for its deep industry knowledge and its ability to provide borrowers with the capital they need to grow their businesses.
8) BlackRock Capital Partners is a private equity firm that provides mezzanine financing to middle market companies in the United States. The firm has over $10 billion in assets under management and has funded over 100 companies since its inception in 1998. BlackRock Capital Partners is known for its strong track record of performance and its ability to provide borrowers with the capital they need to grow their businesses.
9) HPS Partners is a global alternative investment firm that provides mezzanine financing to companies in the United States and around the world. The firm has over $50 billion in assets under management and has funded over 500 companies since its inception in 2005. HPS Partners is known for its deep industry knowledge and its ability to provide borrowers with the capital they need to grow their businesses.
10) Founded in 2004, Madison Capital Funding is a private equity firm that provides mezzanine financing to middle market companies in the United States. The firm has over $1 billion in assets under management and has funded over 100 companies since its inception.
**When choosing a mezzanine lender, it is important to consider the firm’s experience, track record, industry focus, and lending terms. It is also important to make sure that the lender is a good fit for your specific business needs.
These are just a few of the many excellent mezzanine loan providers in the USA. We will also soon bring you a list of state-wise mezzanine providers for easy reference, so don’t forget to bookmark this page so you can take a look anytime you’d like to gain more insight about Mezzanine Loans and Business Loans.
Mezzanine Finance Rates
While the average Mezzanine Financing rates range between 10% – 15%, it is quite simple to find a mezzanine finance provider that offers a better rate, thereby sweetening the deal, irrespective of whether it is a mezzanine lending for real estate or small business.
We’ve listed the cheapest and the best mezzanine finance providers’ current financing rates below but before we dive into it, there are some factors we would like to emphasize and reemphasize on because, we genuinely would not want you to get into a transaction that would not benefit you and your small business.
So, let’s take a closer look:
Be it a loan for real estate mezzanine and/or a business expansion mezzanine, finding the right financing can be a game-changer. Mezzanine financing has emerged as a practical option that bridges equity and traditional debt financing, offering flexibility for ambitious ventures, however, grasping the ins and outs of mezzanine loan rates is crucial. Let’s begin:
Factors Affecting Mezzanine Finance Rates:
As with any other financing, naturally, Mezzanine financing rates too, can be affected by several factors, each playing a role in determining the final interest rate. We can’t stress enough how important a borrower’s credit rating is because it carries weight, serving as a starting point for negotiations with mezzanine lenders. Mezzanine borrowers with stronger credit rating typically secure more favorable rates as compared to our fellow citizens with less favorable credit standings.
Loan size is another factor to consider. Now, with Mezzanine debt, larger loans often come with slightly higher interest rates due to the inherent exposure tied to their scale. Obviously, the purpose of the loan also plays a part here – dealings perceived as riskier may attract higher Mezzanine interest rates to offset any potential uncertainties.
Also, the ebb and flow of the overall market conditions influence mezzanine rates, which generally run parallel to the trajectory of broader interest rates.
September 2023's Finance Rates of the 10-Best Mezz Lenders
Edgewood Capital offers mezzanine loans with a rate of 7.50%, a minimum loan size of $10 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
NewSpring Capital offers mezzanine loans with a rate of 7.75%, a minimum loan size of $5 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
Prime Commercial Lending offers mezzanine loans with a rate of 8.00%, a minimum loan size of $1 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
Golub Capital offers mezzanine loans with a rate of 8.25%, a minimum loan size of $5 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
Great Lakes Capital offers mezzanine loans with a rate of 8.50%, a minimum loan size of $1 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
Apollo Credit offers mezzanine loans with a rate of 8.75%, a minimum loan size of $5 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
Ares Management offers mezzanine loans with a rate of 9.00%, a minimum loan size of $10 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
BlackRock Capital offers mezzanine debts with a rate of 9.25%, a minimum loan size of $5 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
HPS Partners offers mezzanine loans with a rate of 9.50%, a minimum loan size of $1 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
Madison Funding offers mezzanine finance with a rate of 9.75%, a minimum loan size of $5 million, and a term of 5-7 years. The loans may have a prepayment penalty, and the collateral is typically assets pledged to the lender. The drawdown schedule can be either bullet payments or amortizing payments.
Don’t forget to use our Mezzanine Loan Calculator before you head back out to continue with your business 🙂