Mezzanine Funding In Canada. What You’Ll Learn About Cash Flow Financing In Canada
Mezzanine funding in Canada. This somewhat unknown and probably under utilized method of debt financing in Canada provides some unique differences for Canadian business owners and financial managers looking for capital solutions. Let's dig in!
The fundamental basic of ' mezz ' financing is that it best suits firms who have cash flow and growth prospects (and profits by the way) but just seem unable to secure all the financing they need from Canadian chartered banks.
We've often spoken on why our Canadian chartered banks are unable to deliver on the financing your company might need. Issues of quality of hard collateral, debt to equity ratios, or firms who are in turnaround or restructuring mode simply don't always lend themselves to bank financing. Enter Mezzanine finance!
Typical mezzanine structures tend to be in the 5 year range, although that timeframe has the ability to vary. It's critical to note that the mezzanine lender is always attempting to figure out how they will be ' taken out ' of the facility they have put in place for your company. That ' take out' might take the shape of a public offering, or a change into a secured lending facility. In some cases the company may be purchased, acquired or re financed.
While it's safe to say that any lender of substance is always going to assess management strength the ' unsecured' position that mezzanine funding takes on simply requires even more of a focus on the management team of the borrowing company.
So when, and why should Canadian business owners and financial managers consider a mezzanine finance solution. The reality is that a number of different scenarios might be being faced by your firm. This includes:
Contemplating an acquisition
MBO's ( management buy outs )
Restructuring
High Growth Scenarios
Asset Purchases
Let's be clear that all companies who are considering ' mezz ‘are not going to qualify. If your firm is a start up, is in r&d stage, and cant provide the solid cash flow story to repay the mezzanine loan... well let's just say ' its not going to happen '!
The key point around ‘mezz’ funding is that it occupies the unique position of being right in between the concepts of debt and equity because its loan per se its structured and more commonly thought of as debt, but in reality it’s somewhat unsecured. Also important to understand that it is not an operating facility, so don’t view it as operating capital along the lines of a business line of credit or asset based lending solution. Best way to think of it? Permanent working capital! It's a 2nd position financing, behind your secured lenders.
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow financing needs.
P.S. Remember always that it’s cheaper than equity
Stan Prokop [http://www.7parkavenuefinancial.com/stan-prokop]
The fundamental basic of ' mezz ' financing is that it best suits firms who have cash flow and growth prospects (and profits by the way) but just seem unable to secure all the financing they need from Canadian chartered banks.
We've often spoken on why our Canadian chartered banks are unable to deliver on the financing your company might need. Issues of quality of hard collateral, debt to equity ratios, or firms who are in turnaround or restructuring mode simply don't always lend themselves to bank financing. Enter Mezzanine finance!
Typical mezzanine structures tend to be in the 5 year range, although that timeframe has the ability to vary. It's critical to note that the mezzanine lender is always attempting to figure out how they will be ' taken out ' of the facility they have put in place for your company. That ' take out' might take the shape of a public offering, or a change into a secured lending facility. In some cases the company may be purchased, acquired or re financed.
While it's safe to say that any lender of substance is always going to assess management strength the ' unsecured' position that mezzanine funding takes on simply requires even more of a focus on the management team of the borrowing company.
So when, and why should Canadian business owners and financial managers consider a mezzanine finance solution. The reality is that a number of different scenarios might be being faced by your firm. This includes:
Contemplating an acquisition
MBO's ( management buy outs )
Restructuring
High Growth Scenarios
Asset Purchases
Let's be clear that all companies who are considering ' mezz ‘are not going to qualify. If your firm is a start up, is in r&d stage, and cant provide the solid cash flow story to repay the mezzanine loan... well let's just say ' its not going to happen '!
The key point around ‘mezz’ funding is that it occupies the unique position of being right in between the concepts of debt and equity because its loan per se its structured and more commonly thought of as debt, but in reality it’s somewhat unsecured. Also important to understand that it is not an operating facility, so don’t view it as operating capital along the lines of a business line of credit or asset based lending solution. Best way to think of it? Permanent working capital! It's a 2nd position financing, behind your secured lenders.
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow financing needs.
P.S. Remember always that it’s cheaper than equity
Stan Prokop [http://www.7parkavenuefinancial.com/stan-prokop]
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