Since mezzanine financing is usually structured as subordinated debt, the terms mezzanine financing and mezzanine debt are often used interchangeably.
1  Lenders provide subordinated loans (less-senior than traditional loans), and they potentially receive equity interests as well. Mezzanine loans typically have relatively high-interest rates and flexible repayment terms. They carry higher yields than ordinary debt. They are often unsecured debts. 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 assets, and is lent strictly based on a company's ability to repay the debt from free cash flow.
Updated October 17, 2019. Mezzanine debt bridges the gap between debt and equity financing and is one of the highest-risk forms of debt. A number of other characteristics are common in the structuring of mezzanine loans, such as: Mezzanine loans are subordinate to senior debt but have priority over both preferred and common stock. It is subordinate to pure equity but senior to pure debt.

It is usually a great way for growing businesses to bridge the gap between what conventional banks will lend against assets, and the total value of a new project or …

Both terms are often shortened to mezz financing and mezz debt. A mezzanine loan is a form of financing that blends debt and equity. Mezzanine financing is a hybrid of debt and equity that ranks below senior debt but above common stock in a capital structure.