Mezzanine finance is raised by property stgelopers to finance large scale property stgelopments such as building residential units. Mezzanine finance is used in conjunction with bank loans and the property stgeloper’s own equity to fund the stgelopment. In the event that the stgeloper goes bankrupt, mezzanine finance investors stand second in line to the banks to receive their dues, hence explaining the higher rates of interest offered.

The risk with mezzanine finance hinges on the credibility of the property stgeloper, property market conditions and the particulars of the contract.