Mezzanine Finance

There are many different types of finance available to property developers and commercial investors, all of which have their own particular benefits and quirks to be aware of. Mezzanine finance is one area of specialist finance that, while complex, can be a useful tool – providing you can negotiate the right terms.

What is mezzanine finance?

Mezzanine finance can be taken out as a second charge on top of a first charge. Typically, its role is to fill the gap between the finance being provided by a primary development lender, and the deposit a developer has available. This gives developers maximum flexibility, ensuring you can complete the development successfully without needing to tie up all of your liquidity in a deposit.

However, this is not the only route forward to access more liquidity; if you require additional funding, you may wish to explore options around stretched senior debt, as well as mezzanine finance.

What terms are available from mezzanine finance providers?

The pricing of mezzanine finance will vary depending on the circumstances surrounding your case. Pricing will be impacted by the nature of the property you are developing, the location of the property, the amount you wish to borrow, the amount of deposit you can offer, and even your experience as a developer.

Mezzanine finance is generally more expensive than primary development finance; as a form of second charge loan, mezzanine finance providers take on a greater risk. However, as with all forms of property finance, there are excellent deals to be had. You can secure the best mezzanine finance rates and terms by working with a broker like Articus Finance; our experience in the market, and our strong relationships with mezzanine finance providers, mean we can negotiate for the best rates on your behalf.

It’s also worth bearing in mind that mezzanine finance involves a number of additional costs, like arrangement fees. Mezzanine finance typically also involves exit fees – although it can sometimes be arranged without this.

Is mezzanine finance right for your development?

While mezzanine finance could suit you, there are a variety of options available for developers – and the best solution depends on your personal circumstances. In the world of property development, every project is unique, so it’s important to speak to an expert in each instance, and establish the best route forward.

At Articus, we have many years of experience in arranging mezzanine finance for our clients. If you have any further queries, would like to gain an understanding of what you could expect to achieve, or simply want to discuss the best route forward for your development, we are happy to discuss this at your convenience.