Mezzanine finance, placed behind your senior lender to lift leverage

Mezzanine finance is a second-layer development loan that sits behind your senior lender. It increases your leverage and reduces the cash equity you put into a project. Used well, it lets you push gearing from a senior lender’s limit toward 80% or more of total development cost, or free up capital to run the next scheme while this one builds.

Windsor Finance is a property finance broker. We do not lend our own money. We arrange mezzanine and stretched senior structures through a panel of non-bank lenders and private credit funds, then place your deal with the one that fits on cost, leverage, and appetite. No bias toward any single lender.

This page sits under our main development finance hub. Read that first if you want the full picture of senior debt, construction funding, and how a project is financed end to end.

Picture a development funded in layers. Senior debt sits at the bottom, secured by a first mortgage and priced the cheapest. Your equity sits at the top and takes the first loss. Mezzanine is the layer in between. It ranks behind the senior lender, and ahead of your equity. Because the mezzanine lender is repaid after the senior debt, it carries more risk and prices for that risk. In return, you borrow more against the same project and commit less of your own cash. A worked example shows the point. Say a project carries a total development cost of $10m. A senior lender funds 80% of cost, so $8m, and asks you to find the remaining $2m. A mezzanine facility might supply $1m of that gap, behind the senior debt. Your cash contribution drops from $2m to $1m, freeing $1m to deploy elsewhere, at a higher rate on that slice of the stack.

Mezzanine is among the more expensive money on a development. Indicative pricing runs roughly 15% to 22% per annum, often with a line fee or a profit share on top. The lender from our panel sets the final position on application. Read that rate against the term, not in isolation. Mezzanine is drawn for the build and sell-down window, then repaid from senior refinance or sales. It is short-term, project-specific money. The real question is whether the extra leverage produces more profit than the layer costs. On a strong-margin scheme, freeing equity to run a second project can earn more than the mezzanine rate consumes. On a thin-margin scheme, it may not. Run the feasibility both ways first. Every figure here is indicative; the lender confirms the rate, the fees, and the leverage once it sees the feasibility, the security, and your record.

Mezzanine suits a few specific situations. The senior lender has capped your gearing and you do not want to write a larger equity cheque. A mezzanine layer lifts total leverage without renegotiating the senior facility. You have equity but want to keep it working. Rather than sink all your cash into one project, you use mezzanine to reduce the contribution here and run a second scheme alongside it. The capital stack has a gap between senior debt and your available cash. For developers who need equity rather than debt to fill it, a preferred equity or joint venture partner may fit better than mezzanine. Both are arrangements we can place, and both need your lawyer and accountant alongside.

Mezzanine is for established developers with a track record across multiple completed projects. Senior and mezzanine lenders rarely sanction a mezzanine layer for an unproven operator, because higher leverage leaves less margin for a delivery error. If you are a first-time developer, mezzanine is usually not the right first move. The more common path is a senior facility at lower leverage, with you contributing more equity, until you have a delivery record. We will say so honestly rather than push a structure the lenders will decline. Lenders also look at the underlying scheme: planning approval, a credible feasibility, a capable builder, and a clear exit through sale or refinance. A weak exit story sinks a mezzanine request faster than anything else.

There are two ways to reach higher leverage on a development. One is a mezzanine loan behind the senior debt. The other is a stretched senior facility, where a single lender funds a higher percentage of cost from one position rather than splitting it across two layers. Stretched senior is often simpler to document, with one lender and one position to manage. Mezzanine can reach higher total gearing and brings in a specialist lender comfortable with the subordinated risk. Which one is cheaper and faster depends on the lender, the project, and how high you need to push leverage. We model both and place whichever fits.

We work the same way on every development instruction. You outline the project: the site, the approval, the total development cost, the senior position, the equity gap, and the exit. We return one or more indicative structures from suitable non-bank and private lenders, usually within a few business days, no commitment either side, no cost at this stage. Once you choose a route, we package the application so the credit team sees a clean, complete case: the feasibility, the senior terms, the security, the build program, and the exit evidence. We coordinate the intercreditor arrangement between the senior and mezzanine lenders, where second-layer deals most often stall. Funds release in staged drawdowns against the works. You pay nothing at the indicative stage; structuring and lender shortlisting cost nothing until you give the go-ahead to submit, and every cost is disclosed in writing, up front, before you commit.