04/21/2026
A Capital Stack is Not A Loan, It's a Strategy! What Changed over the last few cycles, senior lenders have pulled back from aggressive leverage. Credit committees are tighter, covenants are stricter, and underwriting is less forgiving.
Three structural shifts define the current environment:
Lower senior leverage (more equity required)
Higher cost of capital across the stack
Greater focus on ex*****on risk (not just collateral)
Translation: deals that used to work at 75–80% leverage now require precision structuring to get across the finish line.
The Modern Capital Stack
A properly built stack typically includes:
Senior Debt (50–65% LTC)
Priced for durability. Focused on downside protection and cash flow coverage.
Mezzanine Debt (10–20%)
Bridges the gap. Higher cost, structured for flexibility and speed.
Preferred Equity (10–20%)
Aligned with project-level upside. Often the difference between a stalled deal and a closed one.
Sponsor Equity (10–25%)
The anchor. Signals conviction, absorbs first loss, and defines credibility.
This isn’t layering for the sake of leverage—it’s about matching risk to the right capital.
