Mezzanine property finance in the UK is a type of second charge debt that provides additional funding for property developers and housebuilders. It's designed to bridge the gap between a borrower's capital and the funds a senior lender is willing to offer.

Benefits of mezzanine property finance:

• Access additional funding beyond traditional loan limitations, allowing for larger or more complex projects.
• Minimise equity dilution compared to bringing on additional equity partners/investors.
• Use the funds for various purposes, such as land acquisition, construction costs, or unforeseen expenses.
• Get the capital you need to expedite development and capitalise on market opportunities.
• Maximise your potential return on investment by leveraging additional capital.
• Can be used to meet cost overruns or delays with completing a project.

Is mezzanine financing right for my property project?

Mezzanine lenders favour projects with a clear development plan, strong market demand, and a realistic exit strategy. Ensure your project demonstrates its potential for success.

Clearly define the funding gap between your existing capital and the total project cost. This helps lenders understand the specific role mezzanine finance will play.

Mezzanine finance typically carries higher interest rates compared to senior debt due to the increased risk for the lender from sitting behind the senior lender and the increased loan to value ratio (LTV). Be prepared for these costs and factor them into your project budget.

A proven track record in property development increases your credibility and reassures lenders of your ability to manage the project effectively.

Choosing a lender for mezzanine financing

Choose a reputable lender with a proven track record in mezzanine property finance, such as LandlordInvest. Look for experience in your specific property sector if possible. Another benefit with LandlordInvest is that we’re authorised and regulated by the Financial Conduct Authority whilst most other lenders are unregulated.

Look for lenders who offer some flexibility in terms and structures to accommodate your project's unique needs. Consider also how you can offer flexibility to the lender by offering other business properties or personal assets.

Consider the lender's application and approval process. Some lenders like LandlordInvest specialise in faster turnaround times, which can be crucial for time-sensitive projects.

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