Financing
Mezzanine & Preferred Equity
Extra money behind the main loan, so you put in less cash. Usually used last, to fill a gap on larger deals.
Mezzanine debt is a second loan secured by your ownership interest, behind the main lender. Preferred equity is an investment that gets paid back before you do. Both cost more than a bank loan, and your main lender must agree.
A good fit when
- Deals of about $5 to 10 million and up
- You want to keep ownership rather than bring in a partner
- The main loan alone leaves a gap
Quick facts
| Total leverage | Mezzanine to about 75 to 85% combined; preferred equity to 85 to 90% |
|---|---|
| Cost | About 10 to 15% or more a year |
| Term | Matches the main loan |
| Personal guarantee | Usually not, apart from carve-outs |
| Time to close | 4 to 8 weeks, alongside the main loan |
| Deal size | Usually $5 to 10 million and up |
Typical ranges as of October 2026. Every lender and deal is different.
Watch out for
- High cost
- The investor can take control if things go wrong
- More legal work and the main lender's consent
Mezzanine is a loan; preferred equity is an investment. We can explain how each works and introduce you to providers, but we do not offer, sell or arrange securities. Investment terms are between you and the investor and their own licensed advisers.
General information, not an offer or commitment. Star Advantage Funding is not a lender; every lender sets its own terms.