Why do companies and investors use mezzanine financing?

In materials for a 2018 forum on the development of private funds, the Financial Services Commission explained that growth-stage companies often prefer medium- to long-term mezzanine investment over short-term loans or equity investment in order to keep control of management.

It also noted that investors tend to prefer investing through mezzanine instruments first and converting to equity once the company's growth is confirmed, rather than acquiring equity from the outset. This is only a structural feature, however, and mezzanine securities still carry both the issuer's credit risk and the risk of a falling share price.