A loan that is repaid in regular payments over a set period of time. Similar to a senior term loan but with a second lien rather than first lien on collateral.
Depending on the structure, this loan could be fully subordinated not just a second lien.
There are other types of loans that fit into the gap between senior and mezzanine lending. An example is FILO ("first-in, last-out") lending, which is also called "last-out senior."
Pros:
Allows a line of credit or senior term loan (first lien) to be combined with a term loan (second lien), which permits a higher combined loan balance and a lower blended interest rate.
Cons:
If first and second lien loans are provided by different lenders, there is added complexity (and cost) due to the additional transaction and monitoring costs associated with the second lender and the need for an inter-creditor agreement.
In the technology sector, these loans are primarily for late-stage and middle-market companies.
Typical borrower:
Same as senior term loan (first lien).
If two lenders are required, company should need and meet the requirements for $10 million or more in combined loans to justify the added cost and complexity.
Typical lender:
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