For developers seeking maximum leverage without the administrative complexity of managing multiple lenders, a stretch senior development loan is the ultimate solution. As the name suggests, this product “stretches” higher than a standard senior development loan, effectively combining the leverage provided by a mixture of senior debt and mezzanine finance into one single facility from one lender.
Silver Oak Capital has extensive access to several specialist lenders offering this product. We help you secure up to 75% of the Gross Development Value (GDV) or 90% of Loan to Cost (LTC) in a single transaction, keeping your capital stack clean and your personal equity contribution low.
Stretch Senior Finance is a bespoke type of Senior Development Loan. Instead of borrowing 65% from a senior lender and topping it up with 10% from a mezzanine lender, you borrow the full 75% from a Stretch Senior lender. This product often includes tighter controls and covenants to get comfortable at higher leverage. The primary advantage of this structure is simplicity. There is only one lender, one set of legal instructions, one valuation, and one monitoring surveyor. This eliminates the “Intercreditor Deed” – the complex legal agreement between senior and junior lenders that often delays deals and increases legal fees.
This product is designed for developers who want to optimise their Return on Equity (ROE).
If you want to start a project with as little as 10% cash input (of the total costs), Stretch Senior is the vehicle to do it. It allows you to undertake larger schemes than your current cash reserves would allow under traditional bank lending rules.
Developers who have been burned by the slow pace of arranging mezzanine finance often switch to stretch senior. The speed of execution is significantly faster because you are only satisfying one credit committee, not two.
Because the lender is taking more risk by lending up to 75% LTV, the interest rate is higher than a standard senior development loan but generally lower than a separate mezzanine facility. It is a “blended” cost, typically between 8% and 10% per annum (plus execution fees).
This is often the governing metric. Lenders will typically cap their exposure at 90% of total costs. This means if your project costs £1m to buy and build, they lend £900k, and you are therefore required to put in £100k.
Because the lender has so much skin in the game, they scrutinise the developer’s track record. This product is rarely available to first-time developers unless they have a very experienced main contractor and project manager on board.
High-street banks do not offer Stretch Senior finance. This product is only offered by specialist lenders and niche debt funds. Silver Oak Capital has deep relationships with these liquidity providers, giving you access to capital that isn’t advertised on the high street.
We run the numbers for you. We compare a “Senior + Mezzanine” structure against a “Stretch Senior” structure. We calculate the total interest cost, arrangement fees, and legal fees for both options to demonstrate which route yields the highest net profit for your specific project.
With only one lender involved, the drawdown process during the build is seamless. There is no second lender needing to sign off on the monthly releases, ensuring your cash flow remains uninterrupted.
Yes, but the leverage might be lower. The 75% LTGDV / 90% LTC figures usually apply to residential schemes (flats and houses). For commercial schemes (offices, industrial), lenders may cap the leverage at 65% LTGDV due to the higher risk of finding a tenant/buyer at the end.