How much cash do I actually need with mezzanine in place?

Around 10% of total scheme cost in most structures, against 30–35% with senior debt alone. Lenders want that 10% to be real money you have already spent or can evidence, because it is the only thing standing between them and the first loss.

Is mezzanine cheaper than a joint venture partner?

Usually, on a profitable scheme. A JV partner typically takes 40–50% of the profit; mezzanine at 1.4% per month on £700,000 for 18 months costs around £215,000 all in. On a £900,000 profit the JV costs you far more — but the JV carries the downside with you, and mezzanine does not.

Can I use mezzanine to buy the land?

It can contribute to the land purchase where the senior facility funds the balance and the scheme has planning. Mezzanine on unconsented land is rare and priced closer to equity.

What happens if the scheme loses money?

The senior lender is repaid first from sales, then the mezzanine lender, then you. On a loss-making scheme mezzanine is repaid before you see anything, and the personal guarantee is live. This is precisely why the 20% profit-on-cost test matters.

Will my senior lender allow it?

Most specialist development lenders will, and many have preferred mezzanine partners. High-street banks frequently will not permit a second charge at all — which we establish before the case goes anywhere.

Development capital

Mezzanine Finance

Mezzanine finance is a second-charge layer of development funding that sits behind your senior lender and in front of your own equity, used to close the gap between what the senior facility will advance and what the scheme actually costs. A senior lender stopping at 65–70% of cost leaves a developer finding 30–35% in cash; mezzanine takes the combined position to around 85–90% of cost and 70–75% of gross development value, cutting the cash you put in to roughly 10–15%. It is priced well above senior debt — typically 1.2–2% per month, or a fixed share of profit — because the mezzanine lender is repaid only after the senior debt clears. Used well, it is the difference between running one scheme and running three.

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At a glance

Criteria and pricing

What lenders on our panel will typically do on this product today.

Combined loan to cost: Up to 85–90% including senior debt
Combined loan to GDV: Typically capped at 70–75%
Rate: From ~1.2% pcm rolled; profit-share structures also available
Typical facility size: £250,000 to £10m+
Term: 9–30 months, aligned to the senior facility
Arrangement fee: 2%+, plus an exit fee on many structures
Security: Second charge, intercreditor deed with the senior lender, personal guarantee
Minimum developer equity: Usually 10% of total cost, genuinely cash
Profit on cost required: 20%+ after all finance costs

Worked example

Worked example — £4m GDV residential scheme

Total cost (land plus build): £2,800,000
Gross development value: £4,000,000
Senior debt at 65% of cost: £1,820,000
Equity gap before mezzanine: £980,000
Mezzanine at 1.4% pcm, 18 months: £700,000
Developer cash required: £280,000 (10% of cost)
Combined loan to cost: 90%
Combined loan to GDV: 63%
Mezzanine cost including fees: ≈ £215,000

Figures are typical UK market ranges as at 2026 and are indicative only — your terms depend on the asset, the exit and the lender we place the case with.

Honest fit

Who this works for — and who it does not

You are likely to qualify if

A senior development facility agreed or agreeable in principle — mezzanine is never the first call
At least two comparable completed schemes, or a main contractor and project manager who have
Profit on cost of 20% or more after the mezzanine cost is deducted, not before
Genuine cash equity of around 10% of total cost; vendor deferral rarely counts
A senior lender willing to sign an intercreditor deed

This is the wrong product if

First-time developers — the risk sits second in line and lenders price experience, not optimism
Schemes where the margin only works if values rise during the build
Borrowers looking to take cash out at drawdown rather than fund construction
Cases where the senior lender refuses a second charge, which some clearing banks do as policy

Timescales

What actually happens, and when

Day 0–2
Appraisal review
We stress the appraisal at a 10% GDV fall and a 10% cost overrun. If profit on cost survives that at 20%, the case is fundable; if it does not, mezzanine makes the scheme worse, not better.
Day 3–7
Senior alignment
Terms are negotiated alongside the senior lender so the two facilities share one drawdown schedule and one monitoring surveyor.
Week 2–4
Intercreditor and legals
The intercreditor deed between the two lenders is the long pole. Starting it late is the most common cause of a delayed start on site.
Week 4–6
Drawdown
Both facilities complete together and the first drawdown is released against the surveyor's initial report.

Questions

Frequently asked

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