“Mezzanine Loan Financing Available From $1.0 M To $20.0M”
A mezzanine loan may be required to secure the main construction loan for a given development project.
Acting as a quazi form of equity, mezzanine financing is secured against the property, but is subordinate to the senior construction facility. The funding can be completed in a number of different formats, all customized to the specific project and lender requirements. Mezzanine financing can be actual loans to the senior lender, guarantees, direct project investments, or some combination of these three.
The characteristics of a project that could be considered for mezz financing include but are not limited to the following:
- Mezzanine financing requirements of at least $1,000,000.
- A solid cash contribution being made by the project owners towards the overall project’s capital requirements
- A strong projected annual profit margin in the project that is capable of providing an annualized cost of capital of at least 30%.
- A loan term of no more than three years with a well defined exit strategy as to how the funding will be repaid prior to any mezzanine funds being issued.
- The project must be located in a strong market, demonstrate a good fit to the market requirements, and utilize a well established developer or possess a strong developer track record for similar projects.
Each project is assessed on its own merits with any potential mezzanine financing solution being tailored to meet the requirements of all involved while providing the funding source with the necessary security and comfort necessary to advance capital against the project in a timely fashion.
While a mezzanine loan is not going to always be a fit for each potential project, it can be an excellent solution to completing the overall financing requirements of the development while still keeping the weighted average cost of capital as low as possible through maximizing the senior debt position. Properly constructed mezzanine loans can help secure institutional construction loans at very good rates, providing a solid overall cost of capital to the project.
If you have a development project in southwestern Ontario that may require an equity injection or a form of mezzanine financing, I suggest that you give me a call so we can review the project in detail and discuss potential mezzanine financing options that may be available to your project.