A mezzanine loan is required when you need to expand your business; naturally traditional lending methods normally will not provide the full amount that you need. A mezzanine acts as a bridge between what the bank is offering and the gap remaining of the total cost. It offsets any full price gap between the total amount of the transaction and what the bank is willing to offer. Here are some very crucial steps to secure a mezzanine loan for your business.
AssesstheAmount Of Money You Need:
Cash is the most important element for growing a business, however understanding your business needs is essential. Start with a very strategic vision of your business, knowing where you want to be in the business after acertain period. This will help you understand your financial needs as you create a business financial projection model. Most mezzanine finance lenders want to invest in a business with potential growth because they act like risk investors.
Be Aware Of the Process and Timelines:
When you are in critical need for business financing you should not wait too long to get started. The mezzanine financing process may take several weeks or even months before the transaction is completed, so act fast enough to meet your business financial needs before it is too late. The lenders will want to access your business and evaluate every detail as well as offer you some ideas that could help your business growth. It is also crucial that you are aware of the timelines that are required for repayments so that you make the most of the cash before repayment period starts.
Prepare Your Documents:
Make sure to create a first good impression to your prospective investors, prepare your papers well and include:
- Business Plan: You need to prepare and authentic plan that includes a concise executive summary.
- Financial projections: Prepare a detailed three to five year financial plan and it should also include financial history of the business for the past three to five years. Cash flow of the business is crucial when securing a mezzanine loan. A clear record of cash flow in the business is a clear indication that the business is growing which is a great impression to mezzanine funders.
- Concise Power Presentation: It gives you an outline for talking points for your presentation to financing partners.
Evaluate Proposals:
With a few samples of term sheets in hand, it is time to evaluate the best proposal for your company. There are lot of ways to structure your financing so do not get stuck on one path.
Negotiate The Deal:
When it comes to negotiate the deal, shoot straight and set clear expectations. Most financiers will appreciate a direct approach as it reflects well on the business; if you are confident with the business it is easier to convince another person about it. Investors are only looking for sound investments and are committed to thorough due diligence process, so invest time and energy for the good of your business.