Partnerships are equally important in revitalizing commercial business districts. Commercial development and revitalization projects often depend on three levels of capital to succeed - equity capital, mezzanine financing, and senior debt. Bank loans can provide the senior debt - but a community development project normally will not be viable with bank debt alone. This is where partnerships are critical in providing equity capital or mezzanine financing. The Small Business Investment Corporation or SBIC program is one vehicle for raising equity capital.
Consortia often provide mezzanine financing.
Let me illustrate. A consortium of banks has set aside funds to provide mezzanine financing for viable development proposals. In a typical deal in which this funding would be used, a private developer might put up 15 percent equity. The consortium would finance 30 percent of the project at a rate of return that will vary from 9 to 15 percent - an attractive yield for the consortium members. And a commercial bank will finance the rest.