Product of the week: mezzanine finance with non-compounding interest

GET MORTGAGE ADVICE FROM CALLUM

THE SCENARIO

As this lender will offer terms on a case-by-case basis, this week’s product of the week will instead give an overview of their mezzanine finance offering. Aimed at developers of multi-unit residential and mixed used schemes, this lender is currently offering mezzanine finance with non-compounding interest.

What is mezzanine finance?

Mezzanine Finance is typically used to secure additional funding for development projects. Mezzanine finance plugs a gap in funding for a project, and is often secured by a second ranking or second charge loan. Traditional mezzanine financiers are not entitled to receive returns on their investments until senior debt holders are fully compensated.

How can I use mezzanine finance?

You can use mezzanine finance to plug a gap in funding, where your primar lender will not extend your facility. This means you can complete your development project without costly delays. As a second charge loan, this can be expensive. However, we are currently working with a mezzanine finance lender who offers their loans with non-compounding interest, which could help you to make considerable savings. They can also lend at a higher loan to value than other mezzanine lenders.

What is non-compounding interest?

There are two types of interest; simple and compound. Simple interest is calculated according to the original loan amount. Compound interest, in contrast, is calculated according to the initial amount, and is then also calculated on the accumulated interest. As such, this can be described as ‘interest on interest’. Compound interest is therefore more expensive, and if you have taken out a large loan, this could be costly.

How can this product benefit you?

We have a close working relationship with this lender and are able to secure exclusive rates with them. Through this lender, we can arrange for finance up to 90% loan to value (LTV) on the current site value, with rolled up interest. Alternatively, this lender offers up to 75% of the completed site’s gross development value (GDV).

This lender is suitable for a range of clients, as they offer facilities ranging in size from £250,000 to £7million. They are transparent, flexible, and fast moving. If this sounds like a development finance solution which could benefit you, don’t hesitate to get in touch for a further discussion.

GET FINANCE ADVICE

ARE YOU THINKING ABOUT GETTING DEVELOPMENT FINANCE?

Contact Callum