Mezzanine finance combines elements of debt and equity financing. It provides property developers with quick funding to bridge the gap between a senior loan and equity. The gap emerges from the capped Loan to Value Ratio (LVR) on traditional financing options.
Property developers usually take the help of mezzanine financing when they cannot raise enough capital to complete the project through traditional options such as banks because their project’s perceived risk is high.
Where Can You Use Mezzanine Finance
Mezzanine finance fills in the financial gaps for property developers and can be used for:
- Property acquisitions
- Property development
- Property construction