For as long as some sort of trade-centered economy and society has existed for mankind, people have been financing those activities, either directly or through the sort of intermediaries that we now know as banks or financial institutions. Historically, there have always been two types of financing available for businesses which are trying to raise capital to fund their activities.

That sounds somewhat simplistic but ‘debt’ and ‘equity’ have always been the fundamental financing classes tapped into by businesses, despite the many investment vehicles most businesses have access to.

We begin this section by looking at the characteristics of debt and equity and then conclude by defining the scope of the mezzanine product group.


There are many different ways in which businesses can raise money, the primary ones being ‘debt’ and ‘equity.’ As I mentioned above, that sounds somewhat basic, and I guess it is, looking at the many product choices firms have these days. However, the two groups point at a fundamental difference as we know it in corporate finance. Let's first look at the characteristics of both groups and then at the individual products that are included in these groups. After that, we will look more closely at the hybrid or mezzanine product group.

Although debt and equity are often characterized by referring to the products that feature their characteristics, i.e., stocks and bonds, the true nature of the difference lies ...

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