Mezzanine finance is secured by a second charge and used to “top up” the senior debt (first charge) facility if a developer does not have sufficient cash resources to make the project work using senior debt alone. Whilst senior debt can generally provide up to 65% of GDV or 80% of project costs, mezzanine lenders will top up to 90% of project costs, meaning the developer has to contribute 10% of project costs.

Mezzanine finance, therefore, is another type of development finance, which is used to give you more money than the “senior” lender can provide. As Mezzanine finance is secured by a second legal charge, and at a higher Loan To Value, it is more costly than senior debt.

What are the Key Features of Mezzanine Financing?

• Loans of up to 75% of the Gross Development Value, or;

• Loans of up to 90% of Total Project Costs (plus finance costs).

• The Arrangement Fees charged by the Mezzanine Finance Providers are case by case and start from 1%.

• Interest Rates for Mezzanine Finance start from 12% per annum.

• Exit fees are generally charged but again, case by case.

• Minimum mezzanine loan size is £100,000, with no maximum loan size. - No profit share is generally required with mezzanine loans.

• Up to 36 months term available on larger schemes.

What are the Mezzanine Debt Finance lending criteria?

• Mezzanine Funding is secured by a Second Charge.

• It is essential for developers to be Experienced, to access mezzanine finance.

• Full Detailed planning consent needs to be granted.

• Valuation Reports & QS/ MS reports which are instructed by the senior lender can also be utilised by and addressed to the Mezzanine Lender.

• Available for residential and commercial property development schemes in England, Scotland and Wales.

• Personal Guarantees will be required.