Finance jargon explained
These are just a few commonly used expressions:
Senior Debt - Bank lending e.g 65% of cost
Mezzanine Finance - This is debt that can sometimes top up what the bank lends - often provided by private investors e.g 20%
Equity - the cash contribution that the developer makes. For instance the bank might lend 65% of the total project costs and the developer provides in this instance 35%.
LIBOR - London Interbank Offered Rate - the rate at which banks lend to each other and now commonly used instead of base rate when lending to developers.
Drawdown - When the money is actually lent to the developer - after all of the bank's security is in place.
Monitoring Surveyor - The bank's eyes and ears. The surveyor will verify your costs initially and then certify stage payments for the bank.
Arrangement Fee - A fee that the lender charges to the developer and is usually about 1% of the loan amount and normally paid when the developer accepts the offer of finance. This fee is separate from any fees charged by a valuer, solicitor or monitoring surveyor
Exit Fee - A fee a bank charges on repayment or part repayment of a development loan. Not to be confused with an early repayment fee.