JOHANNESBURG – As South Africa's economy continues to struggle, the disconnect between traditional lenders and entrepreneurs seems to be widening, independent lender Paragon Lending Solutions has said.
This is especially highlighted when it comes to growth finance, with many business owners unaware of products such as mezzanine finance or, if they are, not sure how to access it, Paragon CEO Gary Palmer said.
Mezzanine debt is the middle layer of capital that falls between secured senior debt and equity and is lent based on a company’s ability to repay the debt purely from cash flow.
It is particularly attractive to established and growing companies as business owners do not have to part with equity to secure the deal and terms tend to be more flexible.
Palmer said while South African banks were among the finest in the world, traditional institutions were by nature and regulatory requirement fairly conservative in their lending practices and likely to become more hawkish as the economic environment got tougher.