Definition
The ratio of total borrowed funds to the developer's own equity contribution in a project, expressed either as a ratio or percentage. A project with 75% debt and 25% equity has a debt to equity ratio of 3:1. Higher leverage increases the potential return on equity but also increases risk, and lenders will assess this ratio to ensure the developer has sufficient skin in the game.
See also
Closely related terms.
Capital Stack
The total structure of funding used to finance a development project, arranged by seniority from senior debt at the bottom through mezzanine finance to developer equity at the top.
Equity
The developer's own capital contribution to a project, sitting at the top of the capital stack and bearing the highest risk but also receiving the residual profit.
LTGDV (Loan to Gross Development Value)
A key lending metric in development finance that expresses the total loan amount as a percentage of the gross development value of the completed scheme.
Loan to Cost
A lending metric that expresses the total loan amount as a percentage of the total project costs including land, construction, professional fees, and finance costs.
Further reading
Guides that touch this term.
Guide
The Capital Stack in Property Development: How to Structure Your Funding
A comprehensive guide to understanding and structuring the capital stack in UK property development, from senior debt through mezzanine to equity contributions.
9 min read readReadGuide
How Does Development Finance Work? A Complete Guide for UK Developers
A ground-up guide to how development finance is structured in the UK, covering loan mechanics, drawdown schedules, monitoring surveyors, and what lenders look for in your application.
5 min read readReadGuide
Mezzanine Finance vs Joint Venture Equity: How to Choose
Both mezzanine and JV equity reduce the cash you need to invest. But they work very differently and suit different situations. This guide helps you decide which is right for your project.
4 min read readRead
Where it shows up
Finance products using this term.
Service
Development Finance
Senior debt funding for ground-up residential and commercial developments.
From 6.5% p.a. · Up to 65-70% LTGDVReadService
Mezzanine Finance
Stretch your capital stack beyond senior debt to reduce equity requirements.
From 12% p.a. · Up to 85-90% LTGDVReadService
Equity & Joint Ventures
Equity partnerships and JV structures for developers seeking capital partners.
Profit share from 40% · Up to 100% of costsRead
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