Mezzanine Debt is an expensive form of financing that is typically used for growth stages in a company’s lifecycle when senior bank debt is not readily available and the cost of equity is too high. Mezzanine financing is typically unsecured, carries a high-interest rate (typically 10-24%) due to the higher risk, and typically has more flexible repayment terms. It is often used for short to medium term funding gaps (such as for an acquisition, LBO, working capital bridge loan, etc.)
A Convertible Debenture is a type of loan issued by a company to investors. The Convertible Debenture is generally unsecured and carries a lower rate of interest than Mezzanine Debt, while provides the upside of being convertible into shares of the issuing company.