Do I need a minimum income for a mezzanine development loan?

Mezzanine development finance is a second-charge loan sitting behind the senior lender that takes total funding above the senior ceiling, commonly to 95% or 100% of cost. Mezzanine carries a higher rate and often a profit share, and is used to reduce the developer's equity requirement.

On the cases we arrange, development finance starts from around £50,000, with no set maximum. Single plots and small sites are funded on the same ceilings as larger schemes, by lenders whose minimum loan and appetite suit the scale.

Development finance works in two stages: an initial advance towards the land or existing building, then staged drawdowns of build costs released against a monitoring surveyor's monthly certificates. Interest is rolled up or retained within the facility, and the loan is repaid when the completed units are sold or refinanced onto term mortgages.

100% development finance is available, for the right scheme, through a joint venture lender that provides the senior facility and the equity together, funding the whole scheme cost in exchange for a share of the profit. The developer's cash at risk can be nil, with the site or opportunity, the planning consent and the delivery forming the developer's contribution.

Development finance lenders fall into five groups: high-street banks, lending at the lowest leverage and cost; challenger banks; specialist development lenders, funding to higher ceilings; mezzanine and joint venture funders, providing capital above senior debt; and private lenders and family offices, funding bespoke or time-critical schemes.