Mezzanine finance
Second-charge capital that sits behind senior debt and increases total leverage on a scheme, without giving up a share of profit the way a JV equity partner would.
What is mezzanine finance?
Mezzanine finance is a second-charge facility that ranks behind senior (and stretch senior) debt but ahead of developer equity in the capital stack. It increases the total leverage available on a scheme — typically taking combined debt from around 65–75% LTGDV up to 80–85% — in exchange for a higher rate than senior debt.
It suits developers who want to preserve their own equity or keep more of the profit than a JV structure would allow, and who can service or roll up a higher blended cost of capital across the two tranches.
Who it's for
Developers who want higher leverage than senior debt alone provides, without a JV equity partner.
Schemes with strong margin where the blended cost of senior plus mezzanine still leaves a viable return.
Developers with a track record who want to preserve equity for their next site rather than tie it up in this one.
How it works
Eligibility
Mezzanine is arranged alongside a senior facility, not as a standalone loan — a senior lender must already be in place or being arranged in parallel. Track record and scheme margin are weighted more heavily than for senior debt alone, given the second-charge position.
Costs
Priced above senior debt to reflect the subordinated position — typically a fixed rate or coupon rather than a margin over base rate, plus an arrangement fee. Indicative figures — subject to status, valuation and lender criteria.
When to use mezzanine finance vs. the alternatives
Questions on mezzanine finance
Does mezzanine finance dilute my equity?
No — mezzanine is debt, not equity. You retain full ownership and profit, at the cost of servicing or rolling up a higher blended rate of interest.
Can mezzanine finance be arranged after my senior facility completes?
It is more straightforward to arrange both together, since the senior lender must consent to a second charge; retrofitting mezzanine onto an existing facility is possible but slower.