Mezzanine Debt

A hybrid form of debt and equity whose exact nature depends on the needs of the business concerned and the suppliers of the finance. It is basically debt capital that gives the lender the right to convert to an equity interest in a company if the loan is not paid back in time. It is generally subordinate to debt provided by senior lenders such as banks and venture capital companies. It is sometimes provided to the borrower very quickly with little due diligence and consequently may carry a very high rate of interest.