What is Mezzanine Funding?

Mezzanine finance is generally needed where funds provided by a principle lender is not sufficient to complete a project or fully fund a property.  This type of financing is referred to as "Mezzanine Finance" as it is designed to top up the funds needed to get funding to a required level.  This type of funding can also be used to bridge between 2 finance transactions where finance is required for the short term.

Prior to funding of the loan, the lender will obtain whatever security it desires.  It could be a second mortgage or collateral security over some other asset depending on what security is appropriate for the lender.  Typically mezzanine funding will not exceed the maximum loan to valuation ratio (LVR) of 90%.

Mezzanine funding is repaid in priority to funds contributed by the developer, but after other secured lenders and creditors.  Accordingly, mezzanine financiers may obtain higher returns as they are exposed to a higher risk.  As a result, this form of funding carries a higher risk profile than most other funding.

Should you need to discuss any short term mezzanine funding requirements, please do not hesitate to contact our office via email or telephone.

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