Mezzanine Funding

"We have been providing mezzanine funding to developers for over 15 years and we cover most of the country, from the south coast to Edinburgh. The banks we like to work with include Close Brothers, Paragon, Aldermore, Hampshire Trust, Secure Trust, United Trust Bank, Commercial Acceptances. We are in discussions with a couple of other lenders regarding Deeds of Priority.

 

We fund projects with planning consent but in certain situations we will lend where the developer seeks to improve the planning consent, so long as this is achievable in a reasonable time frame. Over and above the bank, we lend up to 90% of costs.

 

 

Over and above the bank, we lend £250,000 up to (in normal times) £2,000,000 per project.

The developer puts in 10% of project costs.

 

As we lend our own money we use simple interest rather than compounded, but as most lenders use compounded the following is at the equivalent compound rate over a typical 18 month project, 12 months build, 6 months sell, so you can more easily compare like for like.

 

Arrangement fee 1.5% (we add your fee, deduct it from our loan and pay you direct).

Interest 3% per annum

Exit fee 13% per annum on the loan amount

 

The interest of 3% per annum is paid by the developer each month. So a mezzanine loan of say £500,000, at 3% per annum equates to monthly payments of £1,250. In other words the developer services the 3% per annum interest. By doing it this way the developer gets more on day one. It’s the opposite of a bridging loan, where they take all the interest off the loan on day one. 

 

The exit fee is 13% per annum based on the loan amount and is paid, after the bank, from the sales of the residential units. Or a refinance if the developer wants to keep them.

 

 

In addition to the above we are now providing mezzanine funding for smaller projects. Typically small builds and refurbishment projects where the length of the construction work is about 6 to 9 months. For these projects we can provide mezzanine loans from £75,000 to just under £250,000. These smaller and shorter mezzanine loans are at 22.5% per annum as expressed at the equivalent compound rate. 

 

Arrangement fee 1.5% (we add your fee, deduct it from our loan and pay you direct).

Interest 5% per annum

Exit fee 17.5% per annum on the loan amount."