Real estate is a booming business in Connecticut. Are you ready to take advantage of the business opportunities that Connecticut has to offer? Or are you not able to compete with other more established real estate companies because you don’t have the finances needed to make big-ticket investments?
To jump into a venture, you need large funds. Your needs may not be achievable with traditional financing. You need the backing of reliable business funding in Connecticut service to remain competitive and invest in lucrative real estate projects that can guarantee impressive long-term returns. A mezzanine loan is an option you can consider to play the big game and compete with the top players in your industry.
What Is Mezzanine Loan?
Mezzanine debt is a simple way of raising the funds you need to invest in Connecticut’s major projects. It is a funding solution that’s placed between equity and senior debt. There are many benefits mezzanine financing can bring to your real estate business. Let’s look at the key features first.
You can get generally get the funds you need to meet specific costs. Compared to a senior loan, the amount is usually much smaller.
The term of a mezzanine loan may vary depending on the project and the need of the borrower.
The payments on a mezzanine loan include only the interest.
Types of Mezzanine Loans
There are two types of mezzanine loans: pure debt or a mix of debt and equity.
In a pure debt mezzanine loan, the lender advances the funds applied for, and they are repaid with interest without gaining any equity position in the company.
In a mixed mezzanine loan structure, the lender retains some amount of equity in the deal.
Risks of Mezzanine Financing
Likewise, there are three primary risks when mezzanine financing is used in a transaction.
As the interest rate is higher, you may have to achieve more cash flow to pay for the debt service. Apart from the higher rate of interest, some funding services may also charge high fees for processing your mezzanine loan in Connecticut application. You may have to pay an origination fee at the rate of around three percent of the mezzanine loan amount. This can result in a significant increase in the total cost of the capital.
A mezzanine loan can be the ideal choice for certain real estate deals despite the risks. It can also improve returns by reducing the amount of equity in the transaction.
Choosing a fast funding service is important to maximize your benefits from a mezzanine loan. How to find the right one? Search online for a business finding near me, and the results will throw up names of the leading mezzanine loan lending services in Connecticut.
A mezzanine loan can be a great solution to make your business more competitive if you face cash flow issues and a shortage of funds to compete in large real estate projects.