If you need capital to purchase equipment, purchase real estate property, or to boost your business in any other way, you’ve probably already come across two of the most popular types: capital borrowed against equity in your business’ property, or mezzanine financing. There is a large difference between the two, and if you don’t apply for the right one, it could cost your business more than you think.

Both equity-based borrowing and mezzanine financing will provide you with a loan to give you the capital you need for your business. Mezzanine financing however, is an unsecured loan, meaning that no real estate or other assets are needed in order for the business to obtain the loan. This usually makes mezzanine financing appropriate for businesses that require start-up capital, businesses that have very little or no equity in their property, or businesses with blemished credit that wouldn’t be approved for other types of capital.

While mezzanine financing is available and can be a good solution for business owners that are out of options, it is very expensive and it’s a very challenging type of financing to be approved for. Because it requires lenders to take a significant risk, they try to reduce that risk by charging a high interest rate; and that’s what makes mezzanine financing so expensive.

Also due to the risk taken on by the lender, mezzanine financing can be very difficult to obtain. With this type of financing there is no equity for the lender to fall back on, and sometimes not even a good credit record to give them some assurance. Because of that they will do everything they can to verify that you are a quality applicant, and that takes a great deal of time and effort on your part.

When you apply for equity-based capital however, you don’t have to deal with any of the hassle or stress of mezzanine financing. You can simply borrow against the equity in any of your properties and have the capital you need quickly and easily. The difference here is that the only risk is to you, because property has been placed against the loan as collateral. And that makes the loan cheaper, easier, and faster to obtain.

When you need equity-based capital, call us at CMI Capital. We are a team of commercial brokers that can take your business to the next level – whether that’s helping you secure financing on a second property, or helping you put money back into the one you already own with a little more capital.

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