Closing the gap between growth businesses and alternative lenders

(iStock)
(iStock)

Many business owners are unaware of products such as mezzanine finance and, even if they know about it, are unaware how to access it, says Gary Palmer, CEO at Paragon Lending Solutions.

He explains that mezzanine debt is the middle layer of capital that falls between secured senior debt and equity.

This type of capital is usually not secured by a first charge over assets and is lent based on a company's ability to repay the debt purely from cash flow. So, the primary security holder would be the base finance secured against assets and personal securities – most often from the banks.

Mezzanine finance is particularly attractive to established and growing companies as business owners don't have to part with equity to secure the deal, says Palmer.

Terms tend to be more flexible and the funders will often assign a dedicated person to work with companies who have borrowed money.

According to Palmer, SA's alternative lending sector is not as mature as that of Australia, the UK or the US where there are qualified intermediaries between the banks and the clients.

"That said, there is a lot going for local businesses trying to access growth finance. With well over 100 alternative lenders available, working with an independent lender, business leaders are in a great position to find a lender who understands their business and can offer a deal to suit their growth strategy," says Palmer.

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