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Mezzanine
Development
Finance

Connecting Developers With The Right Mezzanine Finance Provider

While BLG does not directly offer standalone mezzanine development finance, we can assist you by connecting you with reputable independent funders who specialize in providing mezzanine funding. This supplementary finance can play a crucial role in advancing your property development projects. Our strength lies in our ability to collaborate with a carefully curated network of mezzanine funders.

Although the specific terms and conditions of the loans are negotiated individually with these providers, we can offer you a comprehensive overview of the typical terms and conditions you might encounter. This information will help you navigate the process with greater clarity and confidence.

12-24 months

Terms between 12 and 24 months

90%

Up to 90% loan to cost
Second charge, 100% secured on property

£3,000,000

Loans from £100,000 to £3,000,000

Farmhouse with blue wooden cladding and spacious driveway
front of a 3 storey block of flats
Modern house with brickwork, large windows and balconies

Mezzanine Debt Finance Overview:

  • Loans from £100,000 to £3 million
  • Up to 90% loan to cost
    (70% loan to Gross Development Value)
  • Terms 12 to 24 months
  • Loans can include part of the land purchase cost
  • Second charge, 100% secured on property

Mezzanine Finance Funding Criteria:

  • Residential: houses, flats, new build, conversions and mixed-use
  • Property with a commercial aspect considered
  • Property across the UK in areas with strong demand
  • Sites to have outline planning in place.

What Is Mezzanine Development Finance, And What Is Its Purpose?

Mezzanine development finance, often referred to as a mezzanine loan or mezz loan, represents secondary debt financing that is extended to property developers with the primary aim of supplementing the existing financing for a development project.

Mezzanine finance in property development is a specialised form of financing that plays a pivotal role in facilitating complex real estate projects. It derives its name from the fact that it occupies a middle or “mezzanine” position in the capital stack, which includes senior debt (such as traditional bank loans) and equity investment. To understand it better, let’s delve into the details of what mezzanine finance for property development entails:

  1. Additional Capital: Mezzanine finance provides property developers with an additional source of capital, often in the form of loans. This capital is typically used to bridge the gap between the equity invested by the developer and the senior debt secured from traditional lenders. Mezzanine lenders take on a higher level of risk compared to senior lenders, which is reflected in the interest rates and terms they offer.
  2. Risk and Reward: Mezzanine financing is considered a riskier form of lending because it is subordinate to senior debt. In other words, if the project encounters financial difficulties or defaults, the senior debt holders get paid before the mezzanine lender. To compensate for this added risk, mezzanine lenders typically charge higher interest rates than traditional lenders. However, in exchange for this higher risk, they also stand to earn potentially higher returns if the project is successful.
  3. Flexible Terms: Mezzanine loans often come with more flexible terms than senior debt, making them attractive to developers. These terms can include things like payment structures, interest rates, and maturity dates. The flexibility allows developers to tailor the financing to their specific project needs.
  4. Project Enhancements: Mezzanine finance is often used to enhance a project’s overall capital structure. Developers can use these funds for various purposes, such as acquiring additional properties, covering construction costs, or even as working capital to manage day-to-day expenses during the development process.
  5. Cash Flow Improvement: Mezzanine finance can also improve a developer’s cash flow. By securing mezzanine loans, developers can reduce their immediate equity contribution to a project, freeing up capital for other investments or future developments.
  6. Scaling Opportunities: Developers can leverage mezzanine finance to take on larger and more ambitious projects than they would be able to with just senior debt and equity. This opens up opportunities for growth and diversification within the real estate market.

In summary, mezzanine finance in property development is a strategic tool that helps developers bridge the financing gap, enhance their capital structure, and pursue larger and more lucrative real estate ventures. While it carries higher risk, its flexibility and potential for increased returns make it an attractive option for experienced developers looking to optimise their project financing. However, developers should carefully consider their financial strategy and risk tolerance before engaging in mezzanine financing.

This financing instrument serves as a valuable tool for property developers, primarily by enhancing their cash flow and enabling them to explore additional development opportunities. If you’re seeking further insights or looking to advance your next residential project, please don’t hesitate to get in touch with BLG today. We’re here to assist you in achieving your goals.

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    "A challenging site like no other with every inch of the plot being built on and 12 apartments built-out through a driveway 2.5m wide off of a main high street with limited access rights, not to mention all the complexities associated with 13 Party Wall Agreements. Most lenders would not have had the vision for the scheme or the confidence in Spiller Builders to build out the scheme.  I just wanted to say how helpful the entire BLG team have been during the build. A very approachable and knowledgeable team, with a “can do” approach to lending. We will be looking to do more business with you for sure."

    “We have used BLG for development finance for over 8 years. During that time we have found their knowledge and expertise in the property development industry to be second to none. Their loan process, pragmatic and flexible approach to lending and flexibility when required has supported our business needs throughout the period and provided us with support to deliver new homes in Bristol and the surrounding areas.”

    “As property developers you never know the curve balls that you may get and a project that is great on paper may prove a bit more tricky.  This happened to us on a project that BLG have funded and throughout they have supported us.  Our business likes to be collaborative and when we hit those tough moments it really felt like we were working as a team with BLG.  If you have a decent project you can get it funded, but what you really need is a business that is there to support and advise you as well.  For us on this project it was BLG.”

    “I approached BLG Development finance with an opportunity I had in Chesham, Buckinghamshire, to build 5 new build houses in 2021. My main contact was Anil Bains who is a Director covering Asset Management. Within very quick timescales, BLG provided me with indicative quotes in regards the finance levels they could offer me. Having considered those levels, I requested a valuation to be carried out which again was dealt with swiftly. We proceeded to completion. The build went very smoothly with monthly monitoring being carried out by BLG and monthly drawdown requests dealt with in a very timely manner. Due to a difficult time generally in the market in regards selling, I was in need of a six-month extension to the loan which again was appraised very quickly and granted. Having dealt with numerous funders over the last 20 years, I can only speak highly of my personal experience with BLG and would very confidently work with them again on any future projects. “

    "From our side it has also been a pleasure working with BLG and the team there. We have found you easy to deal with, proactive in resolving any minor issues that have arisen through the project and shown great flexibility in working with us as a partner. We will certainly like to work with you on future partners."

    “I really appreciate your hard work. We really like the way you communicate & I must say I haven't seen many people who are that approachable.”

    “A very efficient processing team, dealing with the DD once deal credit approved, through to completion”

    “Many thanks for your efforts on this one and getting it approved and sorted so swiftly, very much appreciated. I am sure I will be speaking to your over the coming months.”

    “We had other funding options, but chose to use BLG again, as we work well with the team, who always provide very clear information and advice with a friendly approach throughout the funding process. Very efficient and always very helpful.”

    “Many thanks Anil, it’s been a real pleasure working with BLG so far.  We’re lining up the next project too”

    “We would recommend all staff we have dealt with at BLG, as we are very satisfied with the team and the initial offer/terms presented, then you and the funding team, through to the draw down team at valuation stage.”

    “All documents are clear and the way you keep clients informed, all the way along the funding process, is refreshing for us”

    “With regard to what should be improved at BLG, we work with many lenders in our business and we do not get the help and response we have had on the two projects with all at BLG on our funding for our developments.”

    “We would particularly mention Dave Edwards and Tom Pitts as being central to having a smooth working relationship and being positive and helpful at all times. Their guidance in helping us navigate the project from inception to completion was invaluable. As was their patience, particularly at the beginning. We look forward to many future projects with the BLG team.”

    “We would like to express our appreciation for your support on our development in Bristol. We were very pleased that, from the outset, you shared our vision of the project to convert a dated but classical building, that had outlived its usefulness as a school, into unique luxury apartments with views overlooking the city. We found our dealings practical and streamlined. Monthly payments were processed in an efficient and timely manner.”

    “BLG are very good at communicating with clients and all documents are very clear and all at BLG are always happy to help.”

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