Mezzanine finance is a form of top up funding to fill a gap between a developer’s equity and the amount that the Senior lender will provide. This is secured by having a second charge over the property in question, while the initial lender holds a first charge. By taking out mezzanine funding the developer is able to obtain a good return with minimum cash contribution. There are a number of benefits associated with pursuing this route, including:
We appreciate that each project is different so we have a flexible approach and offer a variety of funding options.
Here is a typical example of a mezzanine loan
Land price = £500,000
Build cost = £500,000
Total spend = £1,000,000
Sale price = £1,500,000
Bank loan provides 60% of costs at approx 4% interest = £600,000 + £24,000 interest
YTC would provide 30% of costs at 25% interest = £300,000 + £75,000 interest
Developer investment 10% = £100,000
To find out more about how we could work with you for your project, please get in touch.