Beyond the Traditional Mortgage

Not every property deal fits neatly into a long-term mortgage. Whether you’re a developer trying to plug a funding gap, an investor pursuing higher leverage, or a landlord facing affordability constraints, alternative structures play a critical role in 2025.

Three of the most important tools are bridging loans, mezzanine finance, and top-slicing. Each has its place, its risks, and its rewards. But too often, borrowers confuse them—or worse, apply them incorrectly, leading to higher costs and exit risk.

At Willow, we see daily how the right choice between these structures can mean the difference between a stalled project and a profitable success.

What Is Bridging Finance?

Bridging is perhaps the most widely known of the three. It is a short-term loan designed to cover an immediate need—buying before selling, funding auction purchases, or financing developments until longer-term debt is available.

The strength of bridging lies in its speed. Facilities can be arranged in days rather than weeks, allowing buyers to move quickly in competitive markets. In our blog on how fast bridging can be arranged, we explored how lenders balance speed with due diligence.

But bridging is expensive. Rates are higher than mortgages, fees are upfront, and exits must be carefully planned. A bridging loan without a defined repayment route—whether through refinance, sale or other liquidity—is a recipe for default.

What Is Mezzanine Finance?

Mezzanine sits between senior debt and equity. It is a form of secondary lending that tops up leverage beyond what senior lenders will provide. For example, if a bank is willing to lend 65% of project costs, mezzanine can push total funding to 80–85%.

The appeal of mezzanine is clear: higher leverage means developers and investors commit less equity. But the price is higher interest and stricter repayment terms. Unlike bridging, mezzanine is not just about speed—it is about maximising leverage within a structured finance stack.

We discussed the rise of mezzanine in our piece on development finance in 2025. In today’s market, where senior lenders are cautious, mezzanine often makes the difference between a deal proceeding or stalling.

What Is Top-Slicing?

Top-slicing is a technique, not a product. It allows lenders to look beyond rental income when assessing affordability, particularly in buy-to-let and portfolio finance. Instead of relying solely on rental stress tests, lenders “top-slice” by considering the borrower’s surplus personal income to bridge the gap.

For landlords facing affordability pressures due to rising interest rates, top-slicing has become invaluable. Without it, many would fail to meet interest coverage ratios (ICR). With it, they can still refinance or grow portfolios, provided they have sufficient personal income.

We looked at similar affordability issues in our article on debt service cover and stress testing in 2025. Top-slicing is one of the few tools that helps landlords pass stricter tests without selling assets.

How Do They Compare?

Although bridging, mezzanine and top-slicing are often mentioned together, they serve very different purposes:

• Bridging: Short-term funding to solve timing issues or provide liquidity before a longer-term exit.
• Mezzanine: Secondary finance to increase leverage in development or investment projects.
• Top-slicing: A lender methodology that enhances affordability, not a separate loan product.

The key is not to see them as competing, but complementary. A developer might use bridging for speed, mezzanine for leverage, and top-slicing to pass affordability on the final refinance.

The Lender’s Perspective

For lenders, each of these structures carries different risks:

• Bridging: Exit risk. Will the borrower repay on time?
• Mezzanine: Subordination risk. Senior lenders must agree, and the mezzanine sits behind them in priority.
• Top-slicing: Sustainability risk. Is the borrower’s personal income stable enough to support property shortfalls?

Understanding these risks is critical, because lenders price accordingly. Bridging commands higher fees due to exit risk; mezzanine charges reflect its junior position; top-slicing is only accepted by lenders confident in the borrower’s wider financial profile.

Insurance and Risk Mitigation

Finance is not just about numbers—it’s about risk management. Lenders increasingly want to see that borrowers have insurance strategies in place.

At Willow, we combine property finance with insurance to give lenders and borrowers greater confidence. For bridging, this might include key person cover if business liquidity is tied to an individual. For mezzanine, lenders often take comfort from life and income protection that safeguard repayment capacity. For landlords relying on top-slicing, personal insurance ensures that surplus income will continue even if illness or redundancy strikes.

By packaging finance with protection, we not only unlock approvals but also safeguard clients’ long-term security.

Case Study: Combining the Tools

One Willow client acquired a mixed-use site with planning permission. They needed immediate funds to complete the purchase, higher leverage to cover build costs, and a route to refinance once the scheme stabilised.

We structured a short-term bridging loan to secure the acquisition, layered in mezzanine finance to push total leverage to 80%, and planned a top-sliced buy-to-let refinance for exit, using the client’s surplus professional income to meet ICR.

The project completed successfully, proving how these tools can be combined rather than treated as standalones.

The Risks of Going Direct

Borrowers who approach lenders directly often misunderstand these products. They may try to use bridging where mezzanine is more appropriate, or assume top-slicing applies universally when in fact it is offered by only a handful of lenders.

Without specialist structuring, the result is higher costs, rejected applications, or stalled projects. Worse, borrowers sometimes end up over-leveraged without a clear exit strategy, exposing themselves to penalties and defaults.

Why 2025 Demands Clarity

In 2025, lenders are cautious. They want transparency, structured exits, and realistic leverage. Borrowers who fail to present their case properly are unlikely to succeed. But those who combine bridging, mezzanine and top-slicing intelligently can achieve higher leverage, faster completions, and long-term sustainability.

The key is clarity: knowing which tool applies to which challenge, and structuring them in a way that reassures lenders.

How Willow Private Finance Helps

At Willow, we bring more than 20 years of experience in structuring complex finance. We understand when bridging is the right solution, when mezzanine enhances a deal, and when top-slicing unlocks affordability.

We also integrate insurance—life, business, and income protection—to strengthen applications and protect borrowers. By packaging finance with protection, we create solutions that are not only approved but also sustainable.

For developers, landlords and investors in 2025, Willow ensures that bridging, mezzanine and top-slicing work in your favour—not against you.

📞 Want Help Navigating Today’s Market?

Book a free strategy call with one of our finance and insurance specialists.

We’ll help you structure the right combination of bridging, mezzanine and top-slicing—so your projects succeed.