Mezzanine Capital for Structured Lending Platforms
Enhance leverage and scale your lending platform with a structured warehouse mezzanine solution.
- Increase advance rates beyond senior funding limits
- Efficient capital to support portfolio growth
- Structured alongside senior lenders within a bankruptcy‑remote SPV
Mezzanine Finance
A Warehouse Mezzanine Facility provides subordinated capital within a structured financing arrangement designed for non-bank lenders and credit originators.
The facility is advanced to a bankruptcy‑remote SPV and is secured against an eligible portfolio of receivables. It operates alongside a senior lender, with the mezzanine tranche funding the residual portion of the borrowing base in accordance with agreed eligibility criteria and advance rates.
The structure enables originators to optimise leverage and scale lending activity, whilst maintaining robust credit discipline through borrowing base controls, performance triggers, and standard intercreditor arrangements.
This solution is particularly suited to established platforms seeking to accelerate origination without diluting ownership or materially increasing senior leverage constraints.
Financial Flexibility: Mastering the Mechanics of Mezzanine Finance
A Warehouse Mezzanine Tranche is a layer of subordinated funding within a structured facility, supporting lending platforms alongside a senior funder. It increases overall leverage while remaining secured against the underlying portfolio through an SPV structure.
The borrower is a bankruptcy‑remote special purpose vehicle (SPV) that holds the loan receivables. The mezzanine facility is not advanced directly to the operating company.
The mezzanine tranche is sized as the residual beneath the senior lender’s advance rate, subject to eligibility criteria, portfolio performance, and agreed concentration limits.
Yes. The facility includes a revolving period (typically 12 months), followed by an amortisation period to allow the portfolio to run off in an orderly manner.
Facilities can support a range of asset classes, including hire purchase, leasing, sale and leaseback, and consumer or SME lending, subject to agreed eligibility criteria.
Borrowing base breaches are typically addressed through a combination of cash top‑ups, asset substitution, or portfolio adjustments, ensuring the facility remains within agreed limits.
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FAQs
How does the mezzanine tranche rank relative to senior debt?
The mezzanine tranche ranks behind the senior lender and ahead of equity. This relationship is governed by an intercreditor agreement, which defines payment priority, control provisions, and enforcement rights.
Are there borrowing base tests?
Yes. The facility is governed by borrowing base calculations, including asset eligibility, arrears thresholds, and concentration limits. These are monitored on an ongoing basis.
What security is provided?
Security is taken over the SPV and its assets, including receivables, bank accounts, and shares in the SPV. These rights are subject to intercreditor arrangements with the senior lender.
How is interest paid?
Interest is cash-pay and typically interest-only during the revolving period. Principal repayment occurs during the amortisation phase through portfolio cash flows.
Are multiple lenders involved?
The structure typically includes one senior lender and one mezzanine lender, ensuring a clear and efficient capital stack within the SPV.
What reporting is required?
Borrowers provide monthly reporting, including portfolio performance and borrowing base calculations, alongside periodic audits.
Is a standby servicer required?
Yes. A standby servicer is appointed to ensure continuity of servicing in the event of operational disruption.
How long does it take to implement?
Implementation typically takes 12+ weeks, depending on audit requirements, legal structuring, and onboarding.
How does this differ from pure mezzanine finance?
Unlike pure mezzanine, this facility is asset-backed, relies on borrowing base mechanics, and is structured through an SPV rather than lent directly to a corporate borrower.