Mezzanine financing is a type of financing that lies between debt and equity financing. It is a form of subordinated debt, meaning that it is considered a higher risk investment than traditional debt financing, and as a result, carries higher interest rates.
Mezzanine financing is typically used by companies that have reached a certain level of growth and are looking for additional funding to expand their operations, but do not want to give up equity in their company. Mezzanine financing provides the company with the funding it needs, while still allowing the company's owners to retain control.
Mezzanine financing is often structured as a convertible security, which can convert into equity if certain conditions are met, such as the company reaching certain financial milestones or the investor deciding to convert their investment into equity.
In summary, mezzanine financing is a form of financing that provides companies with funding without requiring them to give up equity, but carries a higher risk and interest rate compared to traditional debt financing.
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