Subordinate Debt
Flexible second-position financing that bridges the gap between senior debt and equity.
$1M – $25M
Loan Amount
12% – 20%
Typical APR
3 – 7 years
Loan Term
21 – 60 days
Funding Time
What is a Subordinate Debt?
Subordinate debt — also known as mezzanine financing or junior debt — sits between senior secured debt and equity in the capital stack. It carries higher interest rates than senior loans but is less dilutive than raising equity. It is the preferred tool for growth-stage businesses, real estate developers, and acquisition deals that need more leverage than a first-lien lender will provide.
Minimum Credit Score
660+
What Can Funds Be Used For?
Capital Stack Gap Filling
Bridge the gap between senior debt and your equity contribution in a deal
Leveraged Buyouts
Add leverage to LBO deals without additional equity dilution
Real Estate Development
Layer mezzanine debt behind a senior construction or bridge loan
Business Expansion
Fund large-scale expansion without giving up ownership stake
Recapitalizations
Extract equity value while maintaining ownership and operational control
Acquisition Financing
Supplement senior acquisition debt to close a larger deal
How It Works
From application to funding — here is exactly what to expect when applying for a Subordinate Debt.
Present Your Capital Stack
Share your deal structure — including senior debt, equity contribution, and the gap you need subordinate financing to fill.
Lender Review
Mezzanine lenders assess the overall deal quality, the senior lender's position, and your ability to service total debt.
Term Sheet & Negotiation
Receive a term sheet outlining rate, PIK interest options, warrants (if any), and covenants. Terms are often negotiable.
Close Behind Senior Debt
Subordinate debt closes alongside or shortly after your senior loan. Both are structured to work within your deal economics.
Do You Qualify?
Min. Credit Score
660+
EBITDA
$500K+ preferred
Senior Debt Coverage
1.2x DSCR on senior debt
Equity Contribution
10%+ from borrower
Industry
Most established industries
Deal Structure
Defined capital stack required
Pros & Cons
Advantages
Less dilutive than raising equity
PIK (payment-in-kind) options preserve cash flow
Unlocks deals that senior debt alone cannot support
Flexible structures including interest-only periods
Considerations
Higher interest rates (12–20%) than senior debt
Subordinate to senior lender — second in line for repayment
May include equity warrants or profit participation
This deal deserves a specialist — not a form.
Mezzanine and subordinate debt require careful capital stack analysis, lender coordination, and term negotiation. Our team understands how to layer subordinate financing within your deal economics — and how to get it closed.
Your Specialist Team
Marcus Webb
Senior M&A Advisor
Diana Kroft
Capital Structuring Specialist
Our specialists have closed complex transactions across M&A, recapitalizations, and structured debt placements.
Ready to Apply for a Subordinate Debt?
Submit your application in under 10 minutes and get matched with top lenders offering competitive rates tailored to your profile.