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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Mezzanine finance

What is mezzanine finance, and how does a senior lender read it?

ONE OF 180 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Mezzanine finance is debt that ranks behind the senior lender and ahead of the owners' equity, priced well above senior debt because it takes much of the loss if the business or project disappoints. To a senior lender it can be more capital beneath it or a warning: it raises the total debt the business must service, and its rights against the senior lender are set in an intercreditor agreement — the document a senior desk needs before it can read the file at all. A new mezzanine lender on 'very favourable' terms, whose intercreditor terms never arrive, is a question rather than a cushion.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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