Mezzanine Finance Lenders

Mezzanine finance is often used to top up an existing layer of senior debt and can help a large property transaction, growing business or management buy-out get the capital it needs.

A mezzanine finance lender can help you raise capital up to 90% LTV, just in case your senior debt such as your bridging loan or development finance loan is not quite enough.

KP Finance has the ability to make quick decisions and can help you secure quick funding for deals starting from £1 million and over, 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

samuel kalms

Samuel Kalms, Director

What is Mezzanine Finance and How Does It Work?

Mezzanine finance is this added layer on top of a senior debt like a bridging loan and can be used to top up an existing loan or to help a deal go through when there are cash requirements.

If a customer gets a bridging loan up to 75% LTV and finds that down the line they need more capital, but do not have any reserves available, the borrower might seek mezzanine finance to add an additional 10% in funding. Hence it becomes a middle layer, known as a mezzanine.

Mezzanine loans are often complex, but they use debt and equity cleverly. The debt is the simple interest of the loan and depending on the terms agreed, the lender might receive equity in the property or the overall project if the transaction is successful, or even not successful. Clauses may come into plan that give the mezzanine lender a share of profits depending on the circumstances. This equity becomes their security.

The terms for mezzanine finance are usually a maximum of 12 months and the interest rates start from 12% APR which can be a little higher than bridging finance to manage the risk. The repayment can be rolled up in one lump sum upon exit and tax-deductible interest is also available.

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

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

What Are The Benefits of Mezzanine Finance Loans?

The main advantage of mezzanine finance is the ability to maximise returns whilst as a developer making the smallest cash contribution possible. This can be ideal if you are growing your portfolio and your cash is tied up in other projects.

Similarly, if you are running your project such as a property development and renovation and you are struggling with cash flow, mezzanine finance can give you an important injection of cash to help the project go through to completion.

Mezzanine finance companies are also able to turn around decisions quickly and it is possible to have funds available in 2 to 4 weeks. This can be vital to keep the project health from a cash flow perspective and to meet deadlines.

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:

  • Properties in UK, Scotland and Wales
  • Individuals, limited companies and groups 
  • All credit scores considered
  • Financial records and statements
  • Business plan with clear exit strategy
  • Clear costs, budgets and timelines

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?

Mezzanine finance can certainly play an important role for companies looking to top-up their existing finances. It is never ideal to give away shares or equity in your business or the project that you have identified and have been working on. However, in some cases, mezzanine loans can keep a project alive and having this important injection of cash can be crucial to get the project completed and make a profit overall. 

 

How Much Does Mezzanine Finance Cost?

The rates for mezzanine finance start from 12% APR and the rate charged can vary based on the deposit, level of risk, loan duration and more. Lenders will typically charge a 1% arrangement fee upon the initial funding of the loan.

 

How is Mezzanine Finance Repaid?

Loans can be repaid in full upon the exit of the project (maybe the property is sold or the loan is refinanced). 

 

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?

Borrowers will typically give in the region of 5% to 20% in equity in a mezzanine finance agreement.

 

When Is Mezzanine Finance Repaid?

The loan is typically repaid upon exit, however, it is often not even the first or second charge and repayment may be dripped in or delayed for the lender. Hence, taking some kind of equity or profit-share might be more viable for a lender.

 

How is Mezzanine Finance Different To Senior Debt?

Senior debt is usually the first or second charge against the property – and these take first and second priority when it comes to repayment, whether the project is successful or not. Examples include mortgages and bridging loans.

Mezzanine finance sits under this in terms of priorities, and it is sometimes referred to as junior debt.