Mezzanine Finance in Lambeth
Increase your leverage and reduce your equity requirement with mezzanine finance. Achieve combined Loan to Cost of up to 90% for your Lambeth development project by layering mezzanine funding on top of senior debt.
Combined LTC
Up to 90%
Equity From
10% of costs
Rates From
1.0% pm
Security
Second charge
What is Mezzanine Finance?
Mezzanine finance is a second-tier loan that sits between senior debt and developer equity in the capital stack. It is secured by a second legal charge on the development property, behind the senior lender's first charge. The purpose of mezzanine is to reduce the amount of cash equity a developer needs to invest in a project.
For Lambeth developers, mezzanine finance can be the difference between being able to proceed with a project and having to walk away. By reducing the equity requirement from 30-40% of costs to as little as 10%, mezzanine allows developers to take on larger projects, spread their capital across multiple schemes, or simply preserve cash for contingencies.
Mezzanine rates are higher than senior debt — typically 1.0-2.0% per month — reflecting the subordinated position and higher risk. However, when you consider the return on equity (the profit generated from a smaller capital outlay), mezzanine finance often significantly enhances overall returns for the developer.
The Capital Stack with Mezzanine
How mezzanine finance reduces your equity contribution.
Developer Equity
10-15%
Mezzanine Finance
15-25%
Senior Debt
60-70%
Benefits of Mezzanine Finance
Enhanced Returns
Higher return on equity by deploying less of your own capital per project
Multiple Projects
Spread your equity across multiple developments simultaneously
Larger Schemes
Take on larger projects that would otherwise be beyond your equity capacity
Capital Preservation
Retain cash reserves for contingencies and operational costs
Mezzanine vs Stretched Senior
Two approaches to increasing leverage — understanding which suits your Lambeth project.
| Feature | Senior + Mezzanine | Stretched Senior |
|---|---|---|
| Max LTC | Up to 90% | Up to 80% |
| Number of Lenders | Two (senior + mezzanine) | One lender |
| Legal Complexity | Intercreditor agreement required | Single facility agreement |
| Blended Rate | Lower if senior terms are strong | Single rate applies |
| Speed | Slightly longer (dual process) | Faster (single process) |
| Best For | Maximising leverage on strong projects | Speed and simplicity with good leverage |
Mezzanine Finance FAQs
Mezzanine finance is a secondary loan that sits behind (subordinate to) the senior development finance facility. It is secured by a second legal charge on the development site. Mezzanine fills the gap between what the senior lender will provide (typically 60-70% LTC) and the total funding the developer needs, reducing the amount of personal equity required to as little as 10% of project costs.
Mezzanine finance can increase combined Loan to Cost from the typical senior level of 60-70% up to 85-90%. For example, on a £2M total project cost, senior debt might provide £1.4M (70% LTC), and mezzanine could add a further £400K, taking total borrowing to £1.8M (90% LTC). Your equity contribution would reduce from £600K to £200K.
Mezzanine finance rates typically range from 1.0% to 2.0% per month, reflecting the higher risk of the second charge position. Arrangement fees are usually 1.5-2.5% of the mezzanine facility. When blended with the senior debt rate, the overall cost of capital increases but remains manageable if the project has sufficient margin. We always present the blended rate so you can assess overall viability.
An intercreditor agreement (ICA) is a legal document that governs the relationship between the senior lender and the mezzanine lender. It defines priority of repayment, standstill periods, cure rights, and enforcement procedures. We work with experienced legal teams to ensure the ICA is structured fairly and doesn't create delays. Some lenders have pre-agreed ICA templates which speeds up the process.
Mezzanine finance is suitable when you have already identified a senior lender offering good terms but need to reduce your equity. Stretched senior is a single facility from one lender that provides higher leverage (75-80% LTC) without the need for an intercreditor agreement. Stretched senior is simpler but may have a higher overall rate than a well-structured senior plus mezzanine combination. We advise on which approach works best for each project.
Get Mezzanine Finance for Your Lambeth Project
Reduce your equity requirement and maximise your leverage. We structure mezzanine facilities alongside senior debt for Lambeth developments.