Debt vs. Equity Financing: What Developers Should Consider

When it comes to financing a commercial real estate project, one of the biggest questions we help developers answer is: Should this be debt, equity, or a mix of both? There’s no single right answer—it depends on the project, the market, and the developer’s appetite for risk and control.  

Here’s how we look at the two sides of the equation. 

Why Debt Can Be Appealing

Debt financing gives developers access to capital without giving up ownership. That’s a major advantage if the long-term goal is to retain control of the asset and maximize returns. Fixed repayment schedules also provide clarity, and in many cases, the interest is tax-deductible. 

But there’s a flip side. Debt comes with mandatory payments—and that means your project needs to generate steady income or have a strong lease-up plan in place. According to Deloitte’s 2024 Commercial Real Estate Outlook, lenders are watching cash flow more closely than ever as interest rates stay elevated. So, it’s important to make sure the loan terms align with the project timeline and performance expectations. 

When Equity Might Make More Sense

On the equity side, there’s no obligation to make monthly payments. That can be a major advantage during the early stages of a development when cash flow is tight or unpredictable. Equity also helps lower the overall leverage of a deal, which can be attractive to certain partners or long-term investors. 

That said, bringing in equity means sharing ownership—and often, decision-making authority. The more equity you raise, the more voices you’ll have at the table. And depending on the structure, the return expectations from equity partners may exceed those of a traditional lender. 

A recent report from PwC and the Urban Land Institute noted that developers are increasingly turning to joint ventures or preferred equity structures to close capital gaps while managing risk exposure. We’ve seen the same, especially in more complex deals or first-phase projects. 

Finding the Right Mix

Most projects end up with a combination of both. We spend a lot of time helping our borrowers think through the right capital stack—not just what works today, but what will still make sense in two or three years when they’re refinancing or selling. 

Our role is to understand the full picture: project costs, market comps, hold strategy, and risk tolerance. From there, we help structure financing that supports the vision without overextending the deal. Learn more about how to navigate the capital stack and understand debt and equity financing.  

What We Tell Our Borrowers

There’s no universal formula for the perfect capital stack. But there is a right structure for each project—and it starts with understanding the trade-offs. Debt protects ownership but adds pressure on cash flow. Equity eases financial risk but shares the upside. The goal is to build a structure that supports execution and creates value over time. 

At HALL Structured Finance, we partner with our borrowers to design capital structures that align with their business plans while maintaining flexibility. Our platform is built to guide developers through these decisions with confidence—helping them secure capital that fits both the project and the people behind it.