![]() Both types of loans may charge commitment fees, prepayment penalties, and other fees, but these fees tend to be higher for mezzanine.There is rarely equity participation with direct loans, but it’s common with mezzanine.The business models of direct lending funds and mezzanine funds are quite similar: raise money from outside investors, invest directly in issuances from companies, and charge a management fee and incentive fee.īut the risk and potential returns differ significantly: The work is more interesting than DCM since you get modeling and credit analysis exposure rather than constant market update slides.īut it’s still perceived as less modeling-intensive than LevFin or M&A or strong industry teams, and you’ll have fewer exit opportunities than in one of those. Loan sizes tend to be smaller because direct lenders focus on middle-market companies.Ĭareer-wise, direct lending is “better than DCM but not as good as LevFin.”. ![]() But if a bank holds a loan directly on its Balance Sheet, it’s funded by the bank’s deposits and debt, and the bank earns a small fee on the amount raised, with no incentive fee.
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