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Mezzanine Finance Lenders

Mezzanine finance is often used to bridge the gap between senior debt (1st charge) and equity.

It is ranked as a 2nd charge loan (behind the senior debt) meaning mezzanine lenders are repaid after senior debt.

It is typically used for property developers who have secured senior debt but need additional funding for
larger-scale projects like property developments, refurbishments, acquisitions, when they have a shortfall of equity.

A mezzanine finance lender can push the leverage up to 90% of total costs or around 80% of LTV.

KP Finance have relationships with a number of mezzanine finance lenders who can provide debt starting from £1 million across the UK, Scotland and Wales.

Speak to our team using the number provided or complete the form and one of our advisors will come back to you immediately.

Call +44 203 488 1128

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samuel kalms

Samuel Kalms, Director

What is Mezzanine Finance and How Does It Work?

Mezzanine finance is a type of financing used in property investment transactions, typically to bridge the gap between senior debt and the full equity required for a project.

This funding is subordinated to senior debt, meaning mezzanine lenders are repaid after senior debt in case of default.

It is often used for property developers who have secured senior debt (like bridging loans) but need additional funding for large-scale projects like property developments, refurbishments or acquisitions.

In certain cases, mezzanine lenders may take an equity stake or offer profit-sharing arrangements in addition to receiving interest payments.

Overall, it can provide a more flexible and quicker option compared to traditional property finance.

For any questions relating to your development finance project, you can speak to our director Samuel Kalms who will be delighted to assist. 

Call us on 0203 488 1128
Email us at enquiries@kpfinance.co.uk

What Can Mezzanine Finance Be Used For?

  • Top up existing senior loans for residential and commercial properties
  • Large property transactions
  • Management buy-outs
  • Business growth
  • Recapitalisation 
  • Organic expansion

What Are The Terms of Mezzanine Finance?

  • Borrow £1 million +
  • Rates from 12% APR
  • Maximum 90% LTV 
  • Loan period 12 months maximum
  • Combines debt and equity
  • 1% arrangement fee
  • Residential, commercial and mixed-use properties
  • Available in UK, Scotland and Wales
  • Repaid upon exit or interest deferred
  • Equity at risk
Call us on 0203 488 1128
Email us at enquiries@kpfinance.co.uk

What Are The Benefits of Mezzanine Finance Loans?

The main advantage of mezzanine finance is that it allows property developers to secure additional funding without having to contribute more equity or lose a large portion of ownership.

Thus, it can help fund larger property transactions or developments by filling the gap between available senior debt and required equity.

 

For property developers or investors, mezzanine finance can be accessed faster than other forms of financing, speeding up property investment deals – and there is added flexibility compared to traditional loans, such as interest-only payments or repayment terms tailored to the project. 

Useful Guides

How is Development Finance Different To Bridging Finance?

What Are The Different Stages of Development Finance?

What is Development Finance?

Mezzanine Finance Loan Example

A developer is looking to raise £5 million for a large property purchase, which he plans to buy and renovate to make it worth £8 million.

He raises 70% of this through a bridging loan at £3.5 million, but requires 30% more. He contributes £750,00 himself and uses a mezzanine loan to add a further £750,000 which takes the total LTV to 85%. 

The mezzanine lender also takes an equity stake, such as 10% of the developer’s profit on the project which is paid if the project is not successful.

What is The Criteria For Mezzanine Funding?

At KP Finance, we understand that every project is unique and needs to consider individual circumstances. 

We are always able to adapt to different opportunities, but the general criteria may include:

  • Proven track record – A property investor or developer with a history of successful projects
  • Business plan – Outlining the property project, expected returns and timeline
  • Senior debt – Existing senior debt such as a bridging loan is already in place
  • Security – The property or development project itself is often used as collateral, though mezzanine debt is typically unsecured or subordinated
  • Financial history – A strong cash flow and financial history is necessary to meet the mezzanine lender’s expectations (no recent bankruptcy) 
  • Guarantees – A personal guarantee or other assurance may be required, particularly for small developers

Case Studies

planning permission for airspace
Commercial Investment
Residential Investment
Hotel Investment
Residential Development
PBSA Investment
Commercial Portfolio Investment
Residential Bridge-to-Sell
who owns airspace
Residential Portfolio Investment
Mixed-Use Acquisition Bridge

Why Use KP Finance As Mezzanine Finance Lenders?

KP Finance was founded in 2016 by Director Samuel Kalms who uses more than 15 years of experience in real estate finance.

Our passion lies in facilitating the right finance and loans or our clients, from £1 million upwards. We can structure deals according to your requirements and help you with fast funding to keep your moving going.

We can offer critical insight and advice to make sure that you get the best terms, rates and your project will be a success.

KP Finance can offer initial quotes and decisions within 24 hours or sooner – with a view to transfer your funds in weeks, not months.

Frequently Asked Questions

 

Is Mezzanine Finance Right For Me?

Yes, mezzanine finance is suitable for property developers or investors who need additional funding to complete property projects or acquisitions.

Useful for those seeking quick access to capital for time-sensitive property deals.

The product is ideal for developers who have access to senior debt but require more capital than what senior debt will cover – and those seeking quick access to capital for time-sensitive property deals such as large-scale residential or commercial developments.

It is not suitable for those without a solid track record or significant equity to back the loan.

 

How Much Does Mezzanine Finance Cost?

The interest rates for mezzanine finance typically range from 12% to 20% per annum, and this is higher than senior debt due to the added risks included.

Costs may include the fees for structuring the mezzanine deal and additional costs for property appraisals or legal support.

Lenders may request an equity stake in the property project, which can increase the overall cost of capital.

In some cases, the interest may be rolled up into the loan balance, with repayment due at the end of the term.

 

How is Mezzanine Finance Repaid?

Mezzanine finance is generally repaid at the end of the property investment project or after the property is sold or refinanced. 

Repayments may be structured with interest-only payments throughout the term, with the principal repaid at the end of the loan.

Mezzanine loans are typically repaid through the sale or refinancing of the property or development project.

In some cases, repayment can come from the profits of the property sale or long-term rental income generated by the investment.

 

Can I Use Mezzanine Finance For Management Buyouts?

Yes, management buyouts (MBOs) and leveraged buyouts (LBOs) can use mezzanine finance as a way to raise capital, but instead the business and its value is used as the equity, rather than a property.

 

How Much Equity Do You Usually Offer With Mezzanine Finance?

Lenders typically don’t offer equity but may take an equity stake in the property project in return for providing mezzanine finance.

Instead of offering equity to the borrower, mezzanine lenders often receive equity warrants or profit-sharing arrangements, giving them a portion of the profits or future equity if the property performs well.

The equity stake or profit share offered to the lender can range from 5% to 20%, depending on the project size, risk, and the terms of the deal.  

The equity offered is often tied to the success of the property investment, such as profits from a sale or rental income after the property project is completed.

The lender’s involvement in equity allows them to benefit if the property appreciates in value or generates higher-than-expected returns.

 

When Is Mezzanine Finance Repaid?

Mezzanine finance is typically repaid once the property is sold, refinanced, or after a defined exit strategy is achieved.

The timing of repayment is closely tied to the completion or sale of the property, making it project-dependent.

 

How is Mezzanine Finance Different To Senior Debt?

Senior debt has priority over mezzanine finance in terms of repayment, meaning senior lenders are paid first in case of a default.

Mezzanine loans are riskier and more expensive than senior debt, reflected in the higher interest rates.

Senior debt is typically secured by the property or development assets, while mezzanine debt may be unsecured or subordinated.

Mezzanine lenders may take an equity stake or profit share in the property project, while senior lenders usually do not.

Senior debt on development for example will go up to 65% LTGDV and mezzanine finance will allow you to borrow the % above this, typically up to 80% LTGDV.