AFO · Head-to-head
Almost every leveraged deal (acquisition, MBO, large expansion) uses both. Senior debt is the cheapest layer but covers only the first chunk of leverage. Mezzanine sits above the senior tranche at a higher coupon and unlocks the rest of the capital structure. The right ratio depends on coverage, sponsor profile, and how much equity dilution the deal can absorb.
Side by side
The matrix below pulls directly from the catalog. Each row shows the same data point across both programs so you can spot the differences at a glance.
| Attribute | Conventional Senior Term Loan or Revolver | Mezzanine Debt |
|---|---|---|
| Capital type | Conventional senior debt | Mezzanine / subordinated |
| Family | Debt | Debt |
| Size range | $500,000, $25,000,000 | $2,000,000, $25,000,000 |
| Typical cost | Prime + 1 to 4%. GSA + personal guarantee for closely held companies. | 12 to 18% all-in (coupon + PIK + warrant). Usually unsecured or second-lien. |
| Speed to close | Months | Months |
| Eligibility | Operating business with 1.2 to 1.5x EBITDA coverage on proposed debt service. Audited or review-engagement financials typically required. | Established business with credible coverage path. Common in leveraged buyouts, MBOs, and acquisition stacks. |
| Use of proceeds | Expansion, Acquisition, Refinancing, Equipment, Real estate, MBO / buyout | MBO / buyout, Acquisition, Expansion |
| Status | Live, self-serve | Coming soon |
Choosing between them
Each side describes the scenarios where the program is the stronger fit. Most real-world deals end up in the “in common” section below, neither/nor.
When to choose
Senior debt is the bottom tier of the leverage stack, cheapest pricing (Prime+1 to 4%) but the lender's credit committee sets a coverage ceiling and a leverage ceiling. Most senior tranches top out at 3 to 4x EBITDA. Above that, the senior lender will not stretch regardless of rate.
When to choose
Mezzanine fills the layer between the senior ceiling and the equity layer. 12 to 18% all-in (coupon + PIK + sometimes a warrant) but it lets the deal close at higher overall leverage without diluting equity. Used when the founder or sponsor wants to retain ownership and the deal can carry the higher coupon on a five-to-seven-year horizon.
These are stacked, not chosen between. The CPA models the total leverage, the blended cost of capital, and the coverage at each layer to design the stack before the term sheet is signed.
The CPA can look at your specific situation and tell you in one twenty-minute call which program (or stack) is the right structure, and what providers will want to see before the first conversation.
