ACL 390611 | MFAA Member | Established 2005
Mezzanine FinancePriced on Where You Rank.
A mezzanine lender is not lending against your business or your project in the way a senior lender is. It is lending behind one, into whatever is left after the senior lender is paid. That position is the product, and it explains every term you will be offered.
15 minutes with a commercial specialist. Bring the senior offer and the size of the gap. Half the time the useful answer is that the gap should be closed a different way. We charge you nothing at any stage. Lenders pay us a commission on settlement and we disclose it in writing before any work begins.
Intellect Finance – Subordinated Debt
Independent since 2005 | ACL 390611What Is Mezzanine Finance?
Mezzanine finance is a layer of debt that ranks behind a senior lender and ahead of your own equity. It fills the gap between what the senior lender will advance and what you can contribute. The defining feature is not the amount or the term, it is the ranking, and almost everything about the cost follows from that ranking.
That is what separates it from the facilities either side of it. Corporate lending is assessed on the business as a going concern, which is to say on what its operations would be worth if the company were restructured rather than broken up. Asset-based lending is assessed on what specific assets would fetch if they had to be sold separately. Mezzanine is assessed on neither of those. It is assessed on where it sits in the queue when one of them turns out not to be enough.
So the questions change. Not how strong is the borrower, but what is left after the senior lender is repaid, how likely is that to be enough, and what does the mezzanine lender need to be paid for taking that risk. That is a different conversation, and it is usually a shorter one than borrowers expect.
Common Situations
Why People Come to Us for Mezzanine Finance
Six situations. In every one of them the senior facility came first and did not stretch far enough.
A development where senior debt stops short
The most common use by a distance. The senior lender sizes on end value and cost, the developer has less equity than that requires, and mezzanine bridges the difference. See development finance for the senior layer.
An acquisition where the price exceeds fundable assets
Goodwill is discounted hard by senior lenders. Where the buyer is short and vendor finance is not available, subordinated debt sometimes closes the gap.
Buying out a partner or shareholder
The business often cannot support senior debt at the level required in one step. A mezzanine layer, repaid faster than the senior facility, can make the timing work.
Preserving equity for the next project
A developer with the cash to complete but a better use for it elsewhere. This is a genuine reason and also the one most often used to justify a project that does not stack.
A cost overrun mid-project
The hardest and most expensive version. Options narrow sharply once construction is underway and the senior lender is already committed.
Bridging a settlement you cannot move
Short dated subordinated funding against a defined exit. Term and certainty of that exit matter far more here than the margin does.
Social Proof
120+ Five-Star Google Reviews
Business owners, investors and developers alongside home buyers. Pulled live from Google.
Joseph Sukkar
Principal Broker · ACL 390611
Who You’re Dealing With
Built on 25 Years in Australian Finance
Joseph Sukkar started in finance in 2000 and founded Intellect Finance in Penrith in 2005. Since then the team has arranged more than 6,500 loans for clients across Australia, from first homes to complex commercial and asset finance.
Mezzanine files sit with Charbel, our Commercial and Complex Lending Specialist. Subordinated funders do not advertise, do not publish terms and mostly do not take direct approaches, so the first useful work is access, and then establishing whether your senior lender will permit a second ranking facility behind it at all. From there we price the whole stack rather than the gap on its own, because a senior facility with a lower advance and a larger mezzanine layer behind it is often more expensive overall than a senior lender with more appetite and no mezzanine. Where the margin only survives if nothing goes wrong, we say so.
Part of Our 100+ Lender Panel
The names most people recognise are residential lenders. Much of what we arrange runs through funders that do not advertise to the public. Accreditation with a lender is not an endorsement by it, and which lender suits you is decided by your file rather than by who is on this list.
Got a Senior Offer and a Gap?
That is enough for us to tell you how to close it.What Actually Decides It
You Are Not Buying Money. You Are Buying Position.
Every dollar of mezzanine is identical to every dollar of senior debt once it is in the project. What you are paying for is where that dollar sits in the queue when the money runs out. Six things follow from that, and they explain terms that otherwise look arbitrary.
The price reflects the queue rather than your creditworthiness
A borrower can be excellent and still be quoted a high mezzanine rate, because the risk being priced is not whether you are good for the money. It is what would be left over in a downside after the senior lender has been made whole. Arguing your track record rarely moves it. Reducing the gap does.
The law’s default order is not your deal’s order
The PPSR states that a perfected security interest normally ranks ahead of an unperfected one, and that where several are perfected, priority runs from earliest registration date to latest. A mezzanine structure does not simply rely on that. The ranking between the two lenders is set out in a deed they negotiate between themselves, and it is your solicitor’s job to tell you what it says.
A purchase money security interest can still jump ahead
Borrowers often assume the order is settled once senior and mezzanine have agreed. The PPSR states that a perfected purchase money security interest takes priority over a perfected security interest that is not one. So an equipment financier registering later can still rank ahead of both on the asset it funded. Worth knowing before you add a third facility to the structure.
The return is rarely just a rate
Expect some combination of a cash margin, interest that capitalises rather than being paid monthly, establishment and line fees, an exit fee, and on larger transactions warrants or a share of the profit. Two offers with the same headline rate can differ substantially in what they actually cost you. The comparison has to be made on total dollars over the real term.
It is sized on the gap rather than on the security
Senior debt is sized on what the asset or the earnings support. Mezzanine is sized on the space between that number and what you can put in. It is the residual, which means anything that shrinks the gap, more equity, vendor finance, a staged purchase or a senior lender with more appetite, reduces the most expensive money in the structure first.
The term matters more than the margin
Mezzanine is expensive per year, so the total cost is driven by how long it is outstanding rather than by the rate on it. A well defined twelve month exit makes an expensive facility cheap in absolute dollars. An open ended one, or an exit that slips twice, makes an apparently reasonable facility ruinous. Negotiate the exit before you negotiate the rate.
Checked August 2026. Priority rules sourced from the Personal Property Securities Register. The PPSR states that a perfected security interest normally has priority over an unperfected one, that where there is more than one perfected interest the priority order runs from earliest registration date to latest, and that a perfected purchase money security interest takes priority over a perfected security interest that is not one. The PPSR describes these as default rules, notes that there are exceptions, and says this is a complex area of law. See the PPSR on which security interest has priority. The best interests obligations are limited to credit regulated under the National Credit Act by ASIC Regulatory Guide 273. Nothing here is legal advice, and your solicitor must review any intercreditor or subordination arrangement before you sign it. Everything else on this page is described in the important information at the foot of the page.
The Honest Comparison
Mezzanine or More Equity?
There are only two ways to close a funding gap. You borrow it from someone who ranks ahead of you, or you sell part of the upside to someone who stands beside you. Most people arrive having decided without modelling either.
Borrowing the gap
- You keep the ownership and all of the upside above the cost of the debt
- Finite and repayable, so the relationship ends on a known date
- Faster to arrange than finding and negotiating with an equity partner
- The cost accrues whether the project performs or not, and it ranks ahead of you
- A slipped exit compounds against you, because capitalised interest keeps running
Selling part of the gap
- The cost is contingent on performance, so a bad outcome is shared rather than carried
- No fixed repayment date sitting in front of you if the timetable moves
- A capable partner can bring more than money, which subordinated debt never does
- You give away upside permanently, and on a good project that is the expensive option
- Slower, and you take on a decision-maker as well as a funder
If the deal only works with mezzanine, it probably doesn’t work. Mezzanine is priced for the risk that a transaction is marginal, which means it is at its most expensive precisely when the project can least afford it. The test we would apply is simple: run the numbers with the mezzanine cost included and then apply a cost overrun and a softer sale price on top. If the margin survives that, the mezzanine is doing what it should, which is buying you time or preserving equity on a deal that already stacks. If the margin only survives when everything lands perfectly, the mezzanine is not solving the problem, it is hiding it, and it will be the layer that takes the loss. Saying that costs us a fee on the most expensive facility in the structure, and we would rather say it than arrange it.
Run the Overrun Before You Fund the Gap
What the whole stack costs with a cost overrun and a softer sale price on top, and whether the gap should be funded at all. No obligation.The Difference
The Gap Is Usually Negotiable Before It Is Fundable
Most people arrive asking us to price the gap. The more useful first question is whether the gap has to be that size at all.
We Price the Whole Stack Rather Than One Layer
A cheaper senior facility with a lower advance and a larger mezzanine layer behind it is often more expensive overall than a senior lender with more appetite and no mezzanine at all. We compare the structures against each other rather than solving one layer at a time.
We Check the Two Lenders Can Coexist First
Senior lenders differ enormously on whether they permit a second ranking facility behind them and on what conditions. Finding that out after both offers are signed is expensive. We establish it at the start, because a mezzanine offer the senior lender will not accept is worth nothing.
Always in Writing
Mezzanine finance is business purpose lending, so Best Interests Duty does not apply. ASIC Regulatory Guide 273 limits that duty to credit regulated under the National Credit Act. We disclose in writing how we are paid before you proceed regardless of whether the law requires it.
We’ll Tell You Not to Take It
Where the margin only survives if nothing goes wrong, where the exit is a hope rather than a plan, or where the gap exists because the price is too high rather than because the senior lender is conservative, we will say so. That costs us a fee on the most expensive facility in the structure.
The Process
What Happens and What We’ll Need
Faster than a senior application, and far more dependent on what the senior lender has already agreed.
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15 minutes
The gap and where it came from
What the senior lender has offered, what you can contribute, how big the difference is and why. No documents. Often the useful outcome of this call is that the gap can be reduced or removed rather than funded, which is a better result than any quote we could give you.
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We test
Whether the structure survives a bad month
The total cost of the mezzanine over a realistic term, added to the senior debt, then stressed with a cost increase and a weaker exit. If the margin does not absorb that, the answer is not a different funder. We say so at this point rather than after you have paid for legals.
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You gather
The senior position and the project
The mezzanine funder is underwriting what is left after the senior lender, so it needs to see the senior lender’s terms as clearly as it sees yours.
- The senior lender’s letter of offer and conditions
- Feasibility, cost plan or transaction model
- The exit and its evidence, whether presales, a contract or a refinance
- Evidence of your own contribution and where it comes from
- Entity structure, group diagram and existing security registrations
- Business or project financials
- Track record and the people delivering the project
- Identification for directors and guarantors
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We manage
Funder selection then the two lenders talking
Selection across the non-bank and private market, then the part that actually takes the time, which is the senior and mezzanine lenders agreeing terms between themselves. Your solicitor reviews that agreement. Our job is to keep both facilities moving to the same settlement date rather than two different ones.
Track Record
This Market Is Not Visible From the Outside
Subordinated funders do not advertise, do not publish terms and mostly do not take direct approaches. Access is the product here. We have run a commercial desk alongside residential since 2005.
Related Options
The Layers Above and Below
Mezzanine only exists in relation to something else. These are the facilities it sits between, and the ones that sometimes remove the need for it.
Development finance
The senior layer on most projects that end up needing mezzanine behind them.
Business acquisition finance
Where vendor finance often closes the same gap far more cheaply than we can.
Corporate loans
Where the whole debt structure needs looking at rather than one layer of it.
Asset-based lending
Sometimes the gap closes by borrowing more against what you already own.
Commercial property refinance
Releasing equity from a property you hold is nearly always cheaper than subordinated debt.
Every commercial facility we arrange
Back up to the full commercial finance range if none of these is it.
Send Us the Senior Offer.
We’ll tell you whether the gap needs funding or fixing.Questions Answered
Mezzanine Finance FAQs
The questions borrowers ask us most often once they realise the senior facility will not stretch.
What is mezzanine finance?
Mezzanine finance is a layer of debt that ranks behind a senior lender and ahead of your own equity. It is used to fill the gap between what the senior lender will advance and what the borrower can contribute. The defining feature is not the amount or the term, it is the ranking, and almost everything about the cost follows from that ranking.
How is mezzanine finance priced?
On the risk of the position rather than on your creditworthiness. Because the mezzanine lender sits behind the senior lender, it may recover little or nothing in a downside, and it prices for that. The return is also rarely a single rate. It commonly combines a cash margin, interest that capitalises rather than being paid monthly, establishment and line fees, exit fees, and sometimes warrants or a share of the profit. Comparing two offers on headline rate alone tells you very little.
What security does a mezzanine lender take?
Usually a second ranking mortgage over the property, a general security agreement over the company, and personal or corporate guarantees. The security often looks similar to the senior lender’s. What differs is the order in which the two are paid out, which is agreed between the lenders rather than left to the default rules.
Does my senior lender have to agree to mezzanine behind it?
In practice, yes. Senior lenders differ enormously in whether they will permit a second ranking facility behind them and on what conditions. Some refuse outright, some allow it subject to terms about when the mezzanine lender may be paid and when it may enforce. Establishing this before you commit to either facility is the single most useful thing that can be done early.
What is an intercreditor deed?
The agreement between the senior lender and the mezzanine lender that sets out who ranks where, who can be paid and when, who can enforce and in what circumstances, and what happens if the borrower defaults. It is negotiated between the two lenders and their lawyers. It is your solicitor’s document to review, not ours, and it deserves close attention because it governs what happens in exactly the scenario nobody is planning for.
How does the law decide who gets paid first?
There are default rules, and mezzanine deals generally displace them by agreement. The PPSR states that a perfected security interest normally has priority over an unperfected one, that where there is more than one perfected interest the priority order runs from earliest registration date to latest, and that a perfected purchase money security interest takes priority over a perfected security interest that is not one. The PPSR describes these as default rules and notes there are exceptions. This is a complex area and it is a question for your solicitor.
Is mezzanine finance the same as preferred equity?
No, though they occupy a similar position in the funding structure. Mezzanine is debt, so it is repayable on a defined date and its cost accrues whether the project performs or not. Preferred equity is an equity interest with a priority return, so its cost is generally contingent on performance and it usually carries no fixed repayment date. Which one suits depends on how much certainty you want about the repayment obligation, and on how much of the upside you are willing to give away.
Does Best Interests Duty apply to mezzanine finance?
No. ASIC Regulatory Guide 273 states that the best interests obligations apply only to credit regulated under the National Credit Act, meaning credit provided to consumers for personal, domestic or household purposes or for the purchase or improvement of residential investment property. Mezzanine finance is business purpose lending. We disclose in writing how we are paid on every transaction regardless.
Visit Us
Penrith Based.Clients Australia-Wide.
Penrith is our head office and the one you can walk into without an appointment. We also meet clients at Parramatta and in the Sydney CBD by arrangement. Mezzanine files run alongside your solicitor and your senior lender wherever they are based.
Ready When You Are
Tell Us About the Gap.
What the senior lender has offered, what you can contribute, and how big the difference is. Fifteen minutes and we’ll tell you what the whole stack would cost, whether your senior lender will accept a facility behind it, and whether the gap should be funded at all. If the answer is that it should not, you will hear that first. Penrith based, clients Australia-wide. Intellect Finance Pty Ltd, ACL 390611.
Mezzanine finance is business purpose lending and sits outside the consumer credit framework, so Best Interests Duty does not apply to it. We disclose how we are paid before you proceed on every transaction. Nothing on this page is credit assistance, financial advice, tax advice, legal advice or an offer of credit, and no outcome is guaranteed.
Intellect Finance Pty Ltd | Australian Credit Licence 390611 | MFAA Member | AFCA Member
Important information General information only. Not credit assistance or an offer of credit. We charge you no fee. Every caveat and source on this page is collected here. Tap to read.
General information only. The content on this page is general in nature and does not take into account your objectives, financial situation or needs. It is not credit assistance, financial advice, legal advice or tax advice, and it is not an offer of credit. You should consider whether it is appropriate for you and seek your own advice before acting on it.
Nothing here is a guarantee. Loan approval, borrowing capacity, interest rates, loan to value ratios, valuations, timeframes and eligibility are determined by individual lenders and by independent valuers, not by us. They differ between lenders and change over time. Any figure, range or timeframe on this page is indicative and is not a quote, an offer, or a prediction of your outcome. Mezzanine terms vary more between funders than any other facility we arrange and appetite moves quickly, so nothing on this page is an indication of what any particular funder will offer.
Business purpose lending. Credit provided wholly or predominantly for business purposes is not regulated consumer credit, and the Best Interests Duty and responsible lending obligations under the National Consumer Credit Protection Act 2009 do not apply to it. We disclose how we are paid in writing before you proceed on every transaction regardless.
Tax and legal. The tax treatment of interest, capitalised interest, fees and any profit share or equity participation depends on your circumstances and on how the documents are written. We are not tax agents, accountants or solicitors. Confirm the position with a registered tax agent, the Australian Taxation Office, your accountant or your solicitor before acting.
Security, ranking and enforcement. Priority between security interests, intercreditor and subordination arrangements, standstill and payment blocking provisions, guarantees and enforcement rights are legal matters. Nothing on this page is legal advice, and the general priority rules described here have exceptions. Your solicitor must review every facility document and any agreement between your lenders before you sign.
How we are paid. Intellect Finance does not charge borrowers a fee for arranging finance, and does not charge a clawback fee where a loan is discharged early. Lenders pay us a commission on settlement. The basis of that commission is disclosed to you in writing in our Credit Guide before any credit assistance is provided.
Third-party information. Where this page refers to government schemes, regulatory settings, tax treatment or lender policy, that information is sourced from the relevant authority and was correct to the best of our knowledge at the date shown on this page. Those rules change, sometimes without notice. Always confirm the current position with the issuing authority or with us before relying on it.
Found something wrong? If you believe anything on this page is inaccurate or out of date, tell us at joe@intellectfinance.com.au and we will review and correct it.
Intellect Finance Pty Ltd | Australian Credit Licence 390611 | MFAA Member | AFCA Member