Distinguish mezzanine financing from unitranche lending and the circumstances in which a sponsor would pick each

Mezzanine sits between senior debt and equity. It is unsecured or second-lien, with a high coupon often partly paid-in-kind and usually warrants or another equity kicker. It fills the gap below senior debt flexibly, but is costly and dilutive. Unitranche merges senior and junior debt into one loan with a blended rate and one set of documents, usually from a direct lender, and closes quickly and with certainty. Lenders may split it internally into first-out and last-out pieces. Unitranche suits mid-market deals needing speed. Mezzanine suits deals with cheap senior bank debt that want extra leverage. The trap: judge each against the full cost of senior debt plus a junior layer, not against senior debt alone.