Debt, Equity, Hybrid

Capital

Capital can be available in three forms: debt, equity or a hybrid of the two.

Debt

Debt is also referred to as a loan. This can be detailed further as either senior debt or stretched debt all dependent on the size of the loan required as a percentage of the proposed end value of the development (GDV).

EQUITY

Equity is the unsecured element in the capital stack. Equity can also come in the form of a joint venture (JV) set up. There are many occasions where profitable opportunities arise, but your capital is tied up. JV partnerships allow you to access 100% finance with a profit share model. Please note, this is generally only available for experienced developers with a good track record in delivering projects.

Hybrid

The hybrid option often comes by way of mezzanine finance, also referred to as junior debt. This is a secured debt (by way of a second charge) but with a higher risk to the lender therefore it is more expensive. We have access to finance providers that can provide both the senior and junior debt as a one stop-shop solution. 

General Insights:

Debt is the cheapest form of capital

Equity has the high risk but potentially highest rewards

Joint Venture set ups spread risks between parties

Mezzanine finance plugs the financial gap in equity