Mezzanine Finance

At BBA Finance, we provide solutions to help you get higher sanctioned amounts from primary lenders. 

Clearing banks typically provide 60% of cost. Specialist lenders tend to start at 60% of gross development value. Sometimes the primary loan can be as high as 70% of GDV. To top up any facility beyond these levels you can provide an extra layer of finance

This type of funding is known as ‘mezzanine funding’.

Where a developer has sufficient cash to fund a scheme solely with senior debt, mezzanine finance can still prove advantageous. By using smaller amounts of working capital on each project, coupled with mezzanine funding, the developer can generate higher profits from their equity. If the use of mezzanine finance allows a developer to develop three projects instead of one, profits can be increased dramatically and also reduce risk should one of the three get delayed or encounter problems.

When we prepare a funding solution for a Client, we would first establish the level of funding available from a primary lender, alongside the developer’s contribution, and assess what the mezzanine requirements are.

For strong proposals, we can obtain funding up to 95% of the cost. These schemes need to produce a return on cost typically greater than 25%.

Advice that matters

We can help you obtain higher funding from sources, all we need from you is a strong proposal to make it possible.

At BBA Finance we will work closely with you to present your proposal in a professional manner to a range of funders, ensuring you get access to a funding solution tailored to your needs.

Equity Raising

As well as the borrowers’ own equity, sometimes third party equity is needed, from an Equity Investor, particularly if the borrower does not have enough cash (equity) to make the finance package work. Equity Investment is often invested into a project in return for part ownership of that project. This could be shares in the company or a profit share with a priority return on the funds invested. Equity Investment therefore allows the Developer to “unlock” development finance for the project.

Where Stretched Senior Debt and Mezzanine are usually capped at 90% of project costs, Equity providers can fund up to 95% or even 100% of project costs, either in their entirety or in a second charge position, behind a Senior Debt funder.

Given the equity funder is investing in the developer as well as the scheme itself, a developer has to be sufficiently experienced to attract an equity investor and the development project expected to generate a healthy return on cost typically in excess of 25%.

At BBA Finance we have access to a range of equity providers from private individuals, family offices, trusts and private equity funds through to institutional investors.