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Posted on November 30, 1999 by Joy Stoyle | Posted under Loans
Mezzanine Loan - Understanding More About This Loan
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What Exactly is This Loan? First of all, it's important that you fully understand what exactly a mezzanine loan is. Basically this type of loan is a whole lot like getting a second mortgage. However, they are different in that they are secured by a company's stock that owns this property. In the event that the company is not able to make the payments that they are supposed to be paying, then the lender for this type of a loan is able to foreclose on their stack in just a few weeks. In some cases, foreclosing on regular mortgages can take more than a year, but foreclosing on these types of loans goes a whole lot faster, which is definitely a plus for the lender. The Loans are Large When you take a look at a mezzanine loan, you'll find that these are usually very large loans. In fact, usually the least that lenders want to finance for this type of loan is about 2 million dollars. In some cases some companies may finance the loans for a million dollars, but most of the time the lenders don't want to go through all the paper work that is involved for a small amount of money. Lenders Go for Large Projects The lenders out there that are able to give a mezzanine loan usually go for very large projects. In fact, many times you'll find that it is difficult to get one of these loans from the mezzanine lenders if you don't have a property that is not worth at least $10 million dollars or more. Most lenders don't want to spend that much time on something that is not going to be very profitable for them if something goes wrong, which is why they tend to go for very large projects. The 3 Main Uses There are three different types of uses that are usually used when it comes to a mezzanine loan. Sometimes these loans are used as a method to get some cash when the owner doesn't have a way to pull out equity. This frees up some cash for the business. Another use of this loan is to lend money to someone who is purchasing a new piece of property in order to rent. Last of all, sometimes these loans are also used for new construction as well. In many cases commercial construction lenders will not lend the full amount and the company may need to come up with 30-40% of what they need. In this case, the mezzanine lender may be able to give them some of the money that they need so they can get started with their construction. About The Author: |
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