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Mezzanine Finance Solutions: The Powerful Persuasion Of Unsecured Cash Flow Financing
Why Mezzanine Financing Might Be Right (Or Wrong) For Your Firm

 

 

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Mezzanine financing offers a unique allure to Canadian business owners/financial managers that seek additional capital for their firm. However, in certain cases, this type of finance solution is potentially either wrong for your firm or, in some cases, simply not attainable. Let examine what we call the ' powerful persuasion’ of the bridging finance capability of  ' mezz ' and see when it works and when it doesn't... Let's dig in.

 

 

Some of the key uniqueness of Mezzanine solutions revolves around the fact that it has unique elements of debt and equity - rare or non-existent in almost all other financing solutions you might be looking at. This is because it's a  ' 2nd position' financing that stands behind any secured lenders that might already be in place.

 

The other persuasive argument around this solution is the issue of collateral - essentially, there is none other than our aforementioned 2nd position on assets.   Another key item is that other secured lenders tend to ' love ' your mezzanine finance scenario if only because it is treated as ' equity ' on the balance sheet by secured/term lenders/lessors.

 

If the allure of ' MEZZ ' is that attractive, how easy is it to get approved? Companies that are traditionally candidates should have attributes in the following areas:

 

- Established business

- Operating in a viable industry

- Good candidate for growth

 

Above and beyond those ' attributes' is the requirement for historical, present and future cash flow generation that shows the ability to service the unsecured mezzanine debt.

 

The minimum amount of financing done in this area is typically $1,000,000.00, and that clearly is on the small size. Larger deals preferred! In some but not all cases, the lender will also ask for a future equity position in the firm, which owners must consider as a factor in considering this finance method. Top experts advise that firms usually expect to receive ' mezz' financing at least 1-3 times its cash flow - although clearly, amounts will vary.

 

Any type of debt secured or unsecured (Mezz) will inject a certain number of ratios or covenants into the financing. These typically focus on debt to equity, cash flow coverage, etc. However, in some cases, it might limit your firm to what it can spend and how re Capex or shareholder compensation/dividends.

 

We haven’t mentioned the cost of financing ‘. Suffice to say that borrowing rates for mezzanine bridging finance will typically always be in the ' teens,' reflecting the risk a 2nd position lender takes on transactions such as this. Owners/managers typically benchmark this financing cost against other options such as issuing equity, which is even more expensive.

 

Is mezzanine bridging finance right for your company? Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business finance options.  

 

' Canadian Business Financing With The Intelligent Use Of Experience '

 STAN PROKOP
7 Park Avenue Financial/Copyright/2025

 

 

 

 

 

 

Published by 7 Park Avenue Financial. Contact us to discuss funding options for your business.

 

ABOUT THE AUTHOR: Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil