Mezzanine finance is a secondary loan that sits behind senior development finance, increasing the overall leverage on a scheme. It enables developers to reduce their equity contribution while maintaining control of the project.

Borrowing depends on the overall viability of the scheme. In many cases, total leverage can reach up to 80% of GDV or 95% of total costs, subject to underwriting and senior lender approval. The final facility size will depend on build costs, projected values, sales profile and sponsor strength.

Mezzanine finance is priced higher than senior debt because it sits behind it in the capital stack. Rates may start from around 1.5% per month, but pricing depends on leverage, scheme risk and the exit strategy. It’s important to assess the blended cost of capital rather than the mezzanine rate in isolation.

Yes, it can be. Many lenders will consider single units and smaller residential schemes, provided the numbers are strong and the senior lender is aligned. Experience of the sponsor and a clear delivery plan will also influence terms.

It’s used to bridge the gap between senior debt and your equity contribution. By increasing day one funding, mezzanine finance can reduce the amount of capital tied up in a project and improve return on equity. It’s commonly used where a developer wants to run multiple schemes at the same time.

Repayment usually comes from the sale of units or refinance onto a longer-term facility. Because mezzanine sits behind the senior lender, repayment is structured through an agreed intercreditor arrangement that defines priority and timing.

Security typically includes a second charge over the property and a debenture over the borrowing entity. In some cases, a share charge may also be required. An intercreditor deed is agreed with the senior lender to set out rights and repayment order.