Mezzanine capital is a hybrid of debt and equity financing that gives the lender the rights to convert to an equity interest in the company if the loan is not paid back in time and in full. It is typically used by companies that are already profitable and established but not yet ready for an IPO or a strategic sale. It bridges the gap between traditional venture capital and public offering, providing capital for expansion, acquisitions, or strengthening the balance sheet at a stage where the company is growing and starting to generate significant revenue or profit but might not be fully efficient or optimized yet.