Private Credit & Mezzanine Debt in Business Acquisitions: The Quiet Power Behind the Deal
Behind every great acquisition is a capital stack that works quietly — and efficiently.
In the lower-middle-market, access to traditional bank debt can be slow, rigid, and restrictive.
That’s why more operators are turning to private credit and mezzanine debt — flexible forms of institutional capital that fill the gap between senior lenders and equity.
If you’re new to the acquisition financing landscape, start with our Business Acquisition Loans Guide to see how each layer fits together.
What Is Private Credit?
Private credit refers to loans issued by non-bank lenders — like private funds, family offices, and specialty finance firms — to fund acquisitions, recapitalizations, or growth.
Unlike traditional banks, private credit lenders move fast, rely less on rigid covenants, and prioritize the story of the deal as much as the numbers.
Key advantages:
- Faster closings (2–3 weeks vs. 45–90 days for banks)
- Flexible underwriting around cash flow or collateral
- Customized repayment schedules (interest-only, bullet, or step-down)
- Higher leverage potential — up to 5x EBITDA in select cases
Private credit is relationship-based capital — built for entrepreneurs who want speed without sacrificing sophistication.
What Is Mezzanine Debt?
Mezzanine debt sits between senior debt and equity in the capital stack.
It’s typically subordinated to senior lenders but senior to equity investors — offering higher returns to lenders and greater flexibility to borrowers.
In plain terms:
It’s the bridge between the deal you can afford and the deal you should close.
Common Features:
- Interest rate: 12%–16% (often interest-only)
- Term: 3–5 years
- May include warrants or profit participation instead of equity dilution
- Used for acquisitions, recapitalizations, or partner buyouts
When Operators Use Mezzanine or Private Credit
These capital forms shine when you’re:
- Executing roll-up strategies or multi-entity acquisitions
- Buying out partners or recapitalizing ownership
- Need to move faster than SBA or bank timelines allow
- Don’t want to give up equity to private investors
Bridge loans help you move fast; mezzanine and private credit help you scale.
For example:
An operator acquires a $5M HVAC company using 60% senior debt, 25% mezzanine, and 15% equity — keeping control while conserving cash for the next deal.
Private Credit vs. Mezzanine: Key Differences
| Feature | Private Credit | Mezzanine Debt |
|---|---|---|
| Seniority | Senior / 1st lien | Subordinated / 2nd lien |
| Cost of Capital | 10%–13% | 12%–16% |
| Term Length | 1–3 years | 3–5 years |
| Collateral Focus | Asset or cash-flow backed | Enterprise value backed |
| Ideal Use | Fast acquisition or bridge | Expansion or recapitalization |
Together, they give experienced buyers the ability to close complex deals without raising outside equity.
How Aparti Capital Structures Hybrid Capital Stacks
At Aparti Capital, we design layered financing solutions — combining senior debt, bridge capital, seller notes, and mezzanine to fit each acquisition’s timing and complexity.
Our process:
- Evaluate the deal’s leverage capacity and stability.
- Model multiple capital stack scenarios — from SBA to private credit hybrid.
- Present options that align lender confidence with sponsor control.
We work with private credit funds and mezzanine providers who understand the nuance of operator-led acquisitions — where speed, structure, and story all matter.
Schedule a Complimentary Strategy Call
If you’re planning an acquisition or recapitalization and need flexible capital, let’s design your capital stack.
Our team will align private credit, mezzanine, and senior debt to help you move fast — and scale confidently.
