In recent years, it has become increasingly difficult for property developers to secure senior bank funding at higher Loan to Cost (LTC) levels. Regulatory capital requirements and heightened risk sensitivity within the banking sector have led to more conservative underwriting. Senior lenders will typically restrict LTC covenants to between 50–75%, with Loan to Gross Development Value (LTGDV) commonly capped at 55–65%, depending on asset class, borrower strength and scheme complexity.

Mezzanine finance provides a structured solution to this capital shortfall. It enables developers to progress new projects while awaiting sales proceeds from completed schemes, or where available equity is constrained. By introducing subordinated capital into the stack, overall development capacity can be increased without diluting control.

Through structured mezzanine facilities, developers can enhance leverage and optimise return on equity, deploying capital more efficiently across their pipeline. Subject to experience, scheme fundamentals and senior lender consent, Stranks Investments can provide mezzanine funding to support overall leverage of up to 85–90% Loan to Cost, typically over 12–24 month terms.

A key advantage of mezzanine finance is capital efficiency: limited equity can be spread across multiple schemes, accelerating growth while maintaining prudent risk management.

Our lending criteria

• Consented residential development schemes located in England and Wales
• Experienced developers with a demonstrable track record of delivery and profitable exits
• Mezzanine funding requirements typically between £50,000 and £1,000,000
• Borrowers to usually contribute a minimum of 10% of total development costs as cash equity

Deal structure

• Second charge security registered against the development asset
• Formal Deed of Priority (DoP) / Intercreditor Deed (ICD) agreed with the senior lender
• Loan terms of up to 24 months
• Flexible pricing structures, typically on a non-compounding basis
• Interest may be fully or partially rolled and capitalised into the facility