When property developers arrange funding for their projects, they typically arrange the senior debt from banks and major financial institutions. Given that the maximum LVR for senior debt is 75% of costs it often leads to an equity shortfall. Mezzanine Finance offers developers a way to bridge that funding gap between what the senior debt provider is willing to offer and the developers own equity.
Mezzanine finance is only available to a developer once the development has been approved and the initial financing facility (or senior debt) is in place (or about to be put in place). In addition, mezzanine facilities typically require that the risk factors inherent in the project have been mitigated through means such as pre-sales.