Mezzanine Loans typically offer:

Mezzanine loans are a unique form of financing that blend characteristics of both debt and equity. They are typically used in leveraged buyouts and growth capital for businesses and are subordinate to senior debt but rank higher than equity in the capital structure.

The reason that a mix of debt and equity financing risk is the correct choice is that mezzanine loans often come with some form of equity participation, such as equity warrants or options. This allows lenders to partake in the upside potential of the borrower's growth while still requiring regular interest payments characteristic of traditional loans. The elements of both debt (fixed interest payments) and equity (potential for growth in value) mean these loans carry a unique risk profile that is neither fully debt nor fully equity, but rather a hybrid of both.

In contrast, mezzanine loans do not typically offer high security or low interest rates; they usually involve a higher risk, which justifies higher interest rates compared to senior secured loans. They also do not guarantee fixed interest rate payments since some mezzanine financing structures can be variable. Additionally, guaranteed cash flow returns are not a characteristic of mezzanine loans, as the success of repayment heavily relies on the borrower's ability to generate revenue from the business operations.