When you find the “Mezzanine” label indicated in an investment offer published on Walliance, that financing occupies an intermediate position between debt capital (such as bank, mortgage, or land loans) and pure equity.
Repayment is made in the following order: bank loans are liquidated first, then followed by mezzanine, and finally, equity.
From theory to practice: how Mezzanine financing has changed
Mezzanine financing is a little-known financial instrument in Italy, and over time has undergone modifications that have changed its original use, often turning it into a simple medium-term loan. However, the main characteristics of mezzanine should be these:
Priority: subordinate to third-party financing, but repaid before equity.
Duration: medium-term loan.
Purpose: used to replace short-term financing, which can destabilize corporate finances if overused.
Yield: generated by the interests, and can be linked to company profits.
However, in practice, the mezzanine financing has evolved and now has the following characteristics, which you will also find in the offers on Walliance:
Priority: it has priority over equity and other similar forms of financing, but is subordinate only to preferred bank financing (such as mortgages).
Duration: is in the medium term, usually between 2 and 5 years.
Purpose: it supports the development of projects, such as real estate projects, by supplementing equity and bank financing.
Yield: it is composed of interest, usually unrelated to corporate profits.
In conclusion, the original mezzanine financing has transformed and is now often used as medium-term unsecured financing designed to support specific projects, such as those financed through Walliance.