Working capital Working capital to run the business is advanced to accommodate short-term cash flow requirements arising from the normal purchase and sales cycles. It is provided alongside the senior debt, where a somewhat higher level of risk is accepted in return for a higher rate of interest. Because it carries higher risk, mezzanine finance may rank behind senior debt in default priority. These are secured products that are also available to business at large. They are often used as mechanisms to release funds for the acquisition process during a deal.
Term loans are a form of secured borrowing familiar to most people.
An agreed sum is advanced over a fixed period with regular repayments. There is considerable flexibility within this framework. It may be advisable to allow an agreed period of time to elapse before repayments commence to take account of business factors. Advances are made in the longer term and secured against property, as with the domestic counterpart. Again, there is considerable flexibility available in the terms and time scales.