This article is part of our series about Crowdstacker Property Development Loans (PDL). In this article we explain what type of finance PDLs are.
Crowdstacker PDLs are typically mezzanine finance or second charge property-backed loans.
Mezzanine finance is a useful tool used by developers to bridge the gap between the senior lending (most often from a bank) and the actual full cost of a project.
Property developers face the problem of meeting all the property development costs, such as the cost of the land, building materials, labour and professional fees, before a property has been successfully marketed and sold. Working capital is therefore needed to undertake a project.
A bank or other senior lenders will not normally finance the full costs of a project, expecting the developer to find the remainder themselves. Mezzanine funding is the tranche of funding which is provided on top of the senior lender funding. It is often sourced through private investment or lending.
We explain more about mezzanine finance in the articles 'Why don't senior lenders offer mezzanine finance?' and 'Why do developers need mezzanine finance'.
You can find out more about our current PDLs and the rest of the series on PDLs below: