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Oakmead Finance Ltd

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Mezzanine Loan Finance

  • Mezzanine loan facilities ranging from £50k up to £10m
  • Up to 80% of GDP as a second charge mezzanine loan
  • Mezzanine loan facilities up to 90% loan to cost on a net basis
  • Funding from 14% per annum
  • Mezzanine loan interest rates are non-compounding making a huge difference in cost
  • Reduce the equity contribution to 5 – 10% of costs

Mezzanine loan finance provides a top-up layer of funding, sitting above the senior debt provider but under the developer’s equity. Typically this funding is secured by a second charge and allows for the loan to cost to be increased thereby providing debt funding facilities up to a 90% net loan to costs.

It allows developers to de-risk their equity by minimising the cash required to be invested in any one project meaning it can instead be spread among several. This will ultimately provide a greater return.

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Typical Criteria

  • Full planning needs to be granted
  • Project terms between 3 months and 36 months
  • Second charges must be available over the project
  • GDV’s of £500k plus
  • Mezzanine loan requirements from £50k to £10m
  • Projects throughout the UK
  • Strong track record and experience required

Example Facility

Mezzanine loan finance is a popular option for developers to decrease their equity contribution to a project. It is used in conjunction with a senior debt facility and is typically secured by a second charge over the project.

  • This example demonstrates a project with an £8m build cost and a £10m GDV
  • Senior debt provides for £5.2m – 65% of build costs and 48% of GDV
  • Mezzanine funding increases the lend by £2m – an additional 25% of build costs
  • The total debt facility increases to £7.2m – 90% of project costs
  • The effect is a reduction in the developer’s contribution.

Summary Points

  • Funding is available to most developers but a strong track record is preferred
  • Mezzanine loan facilities can leverage the project thereby minimising the developer’s contribution
  • Interest rates are from 14% per annum
  • Interest rates and are non-compounding which dramatically decreases the overall cost
  • Loan facilities are available from £50k to £10m
  • Terms can be between 3 months and 36 months
  • Loans are available for a multitude of developments

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How Oakmead Finance Can Help

Oakmead finance is a trusted specialist in property development finance having helped source and arrange development finance facilities from £250k to £94m.

We have experience in arranging and structuring development finance facilities up to 90% loan to costs including senior debt, mezzanine loans, bridging loan finance and equity finance for our clients. Contact us to discuss your requirements and explore the options available to you.

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