Senior Stretch Loans
A senior stretch loan is a type of structured debt financing which aims to help borrowers or developers leverage as much capital as possible with a single, larger loan facility.
This type of debt shares similarities with bridging, mezzanine and development finance and offers fast funding for property or business transactions.
KP Finance can help borrowers interested in senior stretch financing – for property developers that need to maximise leverage, or organisations involved in leveraged buyouts, management buyouts or recapitalisation.
We have over 30 years of combined experience in real estate finance across the UK and worldwide. With funding starting from £1 million, we can help you find the best structured terms for senior stretch finance over 3 to 36 months, working within your requirements and project timelines.
To make an inquiry, call the number below or use the form provided. The KP Finance team can offer clear and constructive feedback whilst helping you get an initial decision in principle and funding within 2-4 weeks or sooner.
Call +44 203 488 1128
Samuel Kalms, Director
What is a Senior Stretch Loan?
Senior stretch is classed as a first charge development loan and it sits above mezzanine finance.
The structuring of the loan combines both a senior debt (like bridging) and mezzanine finance – and allows one single type of loan rather than needing multiple layers of financing.
This type of funding will typically make up the majority of the financing of the property and this could be up to 75% of the property value or 90% of the total project costs, whichever is the lower of the two figures.
With a senior stretch loan, the borrower can access as much of the project costs as possible to minimise their risk.
Senior stretch debt can be used for both residential and commercial properties including homes, flats, mixed use schemes, student accommodation, hotels, warehouses, offices and nursing homes – and is often used to fund a leveraged buyout or a recapitalisation.
Senior stretch loans are sometimes referred to as unitranche financing or unitranche debt.
What is a Senior Stretch Loan Used For?
- Property purchases and developments that require high leverage
- Residential and commercial property purchases
- Mid-market M&A
- Leverage buyouts
- Growth capital
- Recapitalisations
What Are The Terms Available?
| Term | Details |
|---|---|
| Loan Term | 3-36 months |
| Loan Amount | £1M – £10M+ |
| GDV | Up to 70% GDV |
| Interest Rate Rolled Up | 8%-11% per annum |
| Repayment Type | Retained, Rolled-up or Serviced |
| Security | First charge |
How To Apply For a Senior Stretch Loan
You will start your application by sharing information about the property or acquisition.
The property you are looking to purchase or renovate will be used as security during the loan term. The lender will consider the risk and offer terms based on the customer’s experience, financial background, the value and potential of the property.
All transactions will be subject to a property valuation and a legal review and once fully checked, the loan funds are released in one lump sum.
For lenders, it is key that the borrower has a clear exit strategy for paying off the loan at the end of its term. As a borrower, you will need to demonstrate clear plans, purchase costs, building costs and any necessary building work such as architect and engineering plans.
Simply contact us using the form provided, by email or phone and our team will be available to discuss your requirements further.
Senior Stretch Loan Repayment Example
For a £5 million senior stretch loan:
-
Loan amount: £5,000,000
-
Term: 24 months
-
Purpose: Land acquisition + development costs
-
Loan-to-GDV: Up to 70%
-
Loan-to-Cost (LTC): Up to 85%
-
Interest rate (rolled up): ~9% p.a. (range 8%–11%)
-
Arrangement fee: 1.5% (£75,000)
-
Exit fee: 1.0% (£50,000)
-
Monitoring fees: £1,000 – £2,500 per drawdown (QS monitoring)
-
Repayment: Bullet repayment on exit (sale or refinance)
-
Security:
-
First legal charge over the property
-
Debenture over borrowing entity (SPV)
-
Personal or corporate guarantees (case-dependent)
-
-
Equity contribution: 10%–15% of total costs from developer
Who Would Use a Senior Stretch Loan?
A senior stretch loan is commonly available for experienced property developers with smaller cash contributions and it can help a developer’s equity go further, especially if they have multiple projects or investments.
When used for bridging, senior stretch debt can fill funding gaps when senior debt alone is not sufficient and offer higher leverage without the cost of pure mezzanine debt.
Senior stretch is often seen with acquisitions and buyouts, including leveraged buyouts (LBOs), management buyouts (MBOs) and management buy-ins (MBIs). The ability to simplify the structure of the finance by using one lender and one loan, rather than multiple loans and lenders has seen the product gain popularity in this area.
It is also popular for recapitalisations, helping owners to take cash out of their business while still maintaining ownership.
What Are The Benefits of Senior Stretch Loans?
Simplifies capital structure – With a senior stretch loan, you only need one lender instead of using several. This makes it much easier to organise your borrowing because you’re dealing with just one set of loan terms, one repayment schedule, and one relationship to manage.
Reduces inter-creditor complexities – When multiple lenders are involved, there are often complicated agreements between them about who gets paid first if things go wrong. A senior stretch loan removes most of these issues, as there’s usually just one lender holding all the security.
Provides higher leverage than pure senior debt – A senior stretch loan allows you to borrow more than you could with a traditional senior loan. This means you can fund a bigger part of your project or transaction without needing to put in as much of your own money or find expensive mezzanine finance.
Can be faster to arrange than a multi-tranche structure – Since you are only negotiating with one lender, the process can move much quicker. You avoid the delays and extra work that often come from having to line up multiple loans from different lenders, each with their own requirements.
Case Studies
Frequently Asked Questions
Is KP Finance a Broker?
KP Finance is a broker. Our expertise and experience in the real estate finance industry allows us to place your loan requirements with the best and more suitable lender. This is not about just getting the cheapest rates possible, but rather connecting you to a lender that understands your personal needs and requirements and can offer flexible terms that are structured for you.
Our track records demonstrates our ability to maximise approvals for our customers, helping them access fast funding to bring their projects to life. Please contact us at enquiries@kp-finance.com or call 0203 488 1128 to speak to a team member today.
How is a Senior Stretch Loan Different From a Mezzanine Finance Loan?
Senior stretch is secured and can fund a very large portion of the property purchase and as much as 80% or 90% of the project costs. Mezzanine finance, by comparison, sits on top of senior debt like a bridging loan, and is an unsecured loan that can top up the existing amount – and subsequently becomes a lower priority in terms of repayment.
In terms of the risk levels, both are at the riskier end of the lending spectrum and suited for more established and experienced borrowers and organisations, but the order of repayment priority is key. Senior stretch loans take a first charge against the property making it the first in line to be repaid. Mezzanine finance is added later on in the project and is therefore less of a repayment priority.
How is a Senior Stretch Loan Different To Bridging Finance?
Senior stretch and bridging finance are both types of finance that allow for fast funding of transactions and quick turnarounds. The main differences are that bridging offers a maximum LTV of 75% and senior stretch is designed to offer the maximum amount possible, at up to 80% or 90% of total project costs. The loan duration is also longer, with bridging often maxing out at 24 months and senior stretch available for up to 36 months.
Is Senior Stretch Finance Right For Me?
Senior stretch is better suited for very experienced property developers that are growing their property portfolios, whilst keeping equity in existing projects and schemes.
For businesses that are asset rich and have unpredictable cash flows, senior stretch can be popular, helping to leverage as much capital as possible. If you are in the midst of an acquisition, leveraged buyout, management buy out or management buy-in, it may be worth exploring further.
The ability to access funds quickly and complete within a few weeks or months can make senior stretch finance attractive.
