Mezzanine finance allows developers to increase their investment rate of return (IRR).
Our example below shows how using mezzanine finance can give almost 3x the return on equity, while freeing up more cash towards new projects.
| 18 Month Development Term | With Mezzanine | Without Mezzanine |
| GDV | £5m | £5m |
| Total Costs | £4m | £4m |
| Developer's Profit | £1m | £1m |
| Profit of Cost | 25% | 25% |
| Profit on Sales | 20% | 20% |
| Bank Facility | £2.4m | £2.4m |
| Mezzanine Finance | £1.2m | £0 |
| Total Debt (Bank & Mezzanine) | £3.6m | £2.4m |
| Developer Equity | £400k | £1.6m |
| Mezzanine Interest & Fees | £315k | £0 |
| Net Profit to Developer | £685k | £1m |
| Developer's Return on Equity | 171% | 63% |
