The Capital Stack Explained
A development project is often funded through a capital stack: the combination of funding sources used to pay for the scheme. Not every project needs every layer—some schemes may only require senior development finance, while others might require senior debt plus mezzanine or equity to make the funding structure work.
A simplified capital stack typically includes:
Senior debt: The main secured loan and lowest-risk lender position, which is usually the lowest-cost capital.
Mezzanine debt: An additional loan that sits behind senior debt to increase leverage, and is more expensive than senior debt.
Developer equity or third-party equity: Cash contributed by the developer or investors, which serves as the highest-risk capital and usually receives an upside through profit share or ownership.
Bridging finance: Short-term funding that can sit before or alongside the main capital stack, often used for short-term acquisition, refinance, or timing gaps.
Financing Options Available
Through the new Funding tab (located in the Management panel—see (Fact Sheet: The Assessor]), you can discover indicative funding options across several key property finance categories.
Development Finance Development finance helps fund the construction or major redevelopment of a site. Through the Brickflow integration, users can explore indicative development finance options for a saved site and register interest to discuss the most appropriate structure.
Typical use cases: Ground-up residential development, conversion projects, refurbishment, mixed-use development, and commercial development (where lender appetite exists).
Typical lender considerations: Site location, planning status, required loan amount, total development cost, gross development value (GDV), loan-to-cost ratio, developer experience, and your exit strategy (such as sale, refinance, or retained rental income). If you need to calculate these values first, you can run a high-level model using the calculator outlined in [Fact Sheet: Appraisal Tool Explained].
Senior Debt Senior debt is the main loan secured against a development project. It normally forms the largest debt component of the funding package and is repaid before mezzanine lenders or equity investors.
Typical use cases: Main development loan, site acquisition plus build costs, refinancing an existing loan into a development facility, or funding the senior portion of the capital stack.
Typical characteristics: It carries a first legal charge over the site, poses a lower risk for lenders than junior debt, and usually offers lower pricing than mezzanine or equity. Funds are often released in drawdowns against build progress.
Bridging Finance Bridging finance is short-term funding used to move quickly or cover a temporary funding gap. It can help developers secure a site, refinance, or progress a project while longer-term finance is arranged.
Typical use cases: Site acquisition before planning is finalised, auction purchase funding, refinancing an expiring facility, or funding a pre-development period.
Typical characteristics: It is a short-term facility that is typically faster and more flexible than long-term development finance, but it is usually more expensive. It is heavily underwritten around the repayment route (such as sale or transition into development finance).
Mezzanine Finance Mezzanine finance is additional debt that sits behind the senior lender. It can help bridge the gap between the senior loan and the developer’s required equity contribution, but it is typically more expensive than senior debt.
Typical use cases: Filling the gap between senior debt and developer equity, increasing leverage on a viable scheme, preserving developer cash across multiple projects, or supporting schemes where the developer has strong exit confidence but limited equity.
Typical characteristics: It is subordinated to senior debt, has higher pricing, and is highly sensitive to project risk, GDV assumptions, and your exit route.
Equity Finance Equity finance can help developers fund the portion of a project not covered by debt. It may involve an investor contributing capital in exchange for a return, profit share, or ownership interest.
Typical use cases: The developer does not have enough cash equity for the project, wants to preserve capital across multiple schemes, or is undertaking a large, complex scheme requiring private or institutional capital, or joint venture funding.
Typical characteristics: It sits behind debt in the capital stack (making it the highest-risk capital) and usually expects a higher return than debt.
Commercial Term Finance Commercial term finance is longer-term lending secured against commercial property. It may be relevant where a developer or investor needs to refinance or hold an income-producing asset.
Typical use cases: Refinancing a completed commercial property, holding an investment property, exiting from bridging or development finance, or financing mixed-use schemes where part of the asset has stabilised income.
Typical characteristics: It is a longer-term facility than bridging and is generally used once a property has an established value and income profile, rather than during high-risk construction. It is underwritten against income, rental cover, valuation, and lease profile.
What's next? If you are ready to start preparing your financially viable sites for internal decision-making, head to [Guide: Shortlisting Opportunities].