In the world of Finance, there are many types of lenders, with each specific type of lender playing a vital role in supplying funds to specific sectors. However, when it comes to lenders in the property sector, there are 3 main types of lenders.
Do you know what these lenders are and what they do?
Principal Lender
A Principal Lender is a lender who has priority over all other lenders that may secure a loan against the same asset. Also known as the Senior lender.
They are often lending at a lower loan to value of between 60% – 70%. Leaving the developer to finance difference.
Second Charge Lender
Second Charge Lenders can provide funds to clients; however, Second Charge Lenders provide funds for purchasing a property that are not provided by the Principal lender – providing the necessary funds that the main lender may not be able to provide. Taking second priority to the first lender will normally involve having to obtain written consent from the Principal Lender.
The main purpose of a Second Choice Lender is to provide a borrower with additional funds, whilst allowing them to leave an existing loan or mortgage in place.
Mezzanine Lender
Mezzanine Finance is a hybrid of debt and equity financing, meaning that Mezzanine Lenders aim to provide you with funds that can help to fill the gaps that your Principal Lender may not be able or willing to provide.
Lenders who specialise in Mezzanine Finance are normally called into action during a purchase. This means that they are used to replace the funds that would most likely have been invested by an equity investor.
Mezzanine finance is commonly the most expensive form of borrowing and therefore the loan-to-value gap is normally 10% – 20%, with interest rates being anywhere between 18% – 24%.
How Can We Help?
Hawk Finance can act as both a first-charge principal lender or as a second-charge and mezzanine lender, filling the gap your senior lender is unable to provide. So, whatever the nature of your finance, we can work flexibly around your needs and timescales to ensure your projects can be delivered on time.
If you require flexible and bespoke funding, don’t hesitate to get in touch with us today.