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Mezzanine Financing

Mezzanine Financing

Mezzanine financing can be a great option for leveraging additional debt to reduce the capital needed to close on a transaction. This can often mean the difference between getting a deal done or not. We have several relationships with Mezzanine Lenders that can be utilized when there is a benefit to utilizing this type of financing.

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Hotel Mezzanine Financing

Mezzanine financing can be a confusing topic, and many are not sure how it works and if it will work for them. At Hotelloans.com, our financing experts have access to several Mezzanine lenders who could make all the difference for you. Mezzanine financing is definitely worth taking a look at to see if it’s the right fit for you.

Mezzanine financing can be a great option for leveraging additional debt to reduce the capital needed to close on a transaction. This can often mean the difference between getting a deal done or not. We have several relationships with Mezzanine Lenders that can be utilized when there is a benefit to utilizing this type of financing.

What is Mezzanine Financing?

Mezzanine financing loans can give you flexibility when you need it most for acquiring funds for your hotel projects. They are designed to get higher leverage so you can reduce the capital injection needed. This can help in a number of ways, from resolving cash flow issues constructing a new hotel, or in acquiring new hotel properties.  Mezzanine financing can help you get to a higher leverage or LTV than what a first-lien lender will provide. 

A mezzanine loan is considered to be high-risk hotel lending financing because it is typically in 2nd or even 3rd lien position. If you already have a large first mortgage, finding a lender who is willing to give you a second mortgage can be a challenge. Mezzanine loans are different from traditional commercial financing and can offer added incentives to the lender, like an equity kicker.

How a Mezzanine Loan is Structured

Mezzanine loans are usually issued for amounts over $1 million and are typically structured to be short-term lasting upward of 24 – 36 months. The lender will decide on the rate, whether it is to be a fixed rate, floating rate, or amortized. Most often, mezzanine loans are short-term floating rate interest-only arrangements to be repaid as quickly as possible.

When should you use a mezzanine loan? Typically, there are three purposes for them:

  • The most common use of mezzanine financing is in conjunction with a 1st lien lender to get higher leverage.  This preservation of capital can help to acquire other income-producing properties.
  • Mezzanine loans can be used for new construction to get a higher loan-to-cost.
  • Hotel mezzanine financing can provide added cash for expenses or to pay off debt. Any funds which are borrowed can be repaid out of the income generated by the hotel.

By using mezzanine financing as a strategic tool hotel owners can put less money into the deal allowing them to take advantage of other opportunities in the real estate marketplace.

How Mezzanine Loans Help the Hotel and Lodging Industries

At Hotelloans.com, our focus is on providing you funding for your hotel or other lodging facility. We realize you may need a large amount of capital to reach your goals, expand your portfolio, purchase a new property, or renovate an existing property. We know hotel funding inside and out and how vital it is that your business acquire the right financing now, not later.

Often, banks are unwilling to provide all of the required money you need for a significant project or for another acquisition that is important to you. We provide funding options like mezzanine loans that are designed to fill the gap where needed.

As a hotel owner or property developer, you understand the importance of taking advantage of opportunities in the real estate marketplace when they are available. This comes down to making timely decisions, and time cannot wait on traditional business funding to come through. We understand this and can help provide the best financing options to meet your timeline.

Mezzanine Financing is Worth Looking Into

Mezzanine financing can be a great option for you when it comes to leveraging additional debt to reduce capital needed to close on a transaction. Companies, small businesses, hotels, motels and other lodging properties are all expanding rapidly once they find the right funding vehicle that makes their company grow.

Mezzanine financing can help you to support such growth and increase the value of your acquisition. Once you are on the road to even greater success, you are often a prime candidate for mezzanine financing and all it has to offer to you and your hotel.

Mezzanine loans are subordinate, non-traditional loans which may be a blend of equity and debt or just debt. To find out how one of these loans can benefit you, contact us today.

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