Glossary - Mezzanine Financing

Mezzanine financing is a hybrid form of capital that sits between pure equity and secured debt, often used to finance the expansion of existing companies. It is typically subordinated to debt provided by senior lenders such as banks and venture capital firms but ranks above equity for claims on assets or earnings. Mezzanine financing can be structured as preferred equity or subordinated debt, with features such as warrants or options, giving lenders the right to convert to an equity interest in the company under certain conditions. This type of financing is often sought by companies that are too large for venture capital but not large enough to raise a significant round of financing through a public offering.