A hybrid of debt and equity funding that a company uses to finance its growth plans. Mezzanine financing is debt financing that creditors may convert into equity if the debt repayments are not fulfilled. This has a high interest rate of as much as 20% to 30% due to the lack of collateral, the risky nature of the activities being funded and the lack of time to perform due diligence. Mezzanine finance is often used during leveraged buy-outs.
This definition is for general information purposes only
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