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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Equity first (development loan)

What does equity first mean on a development loan?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Equity first is the drawdown order on a development loan under which the developer's own contribution is spent on the project before the bank advances anything, rather than the two being drawn side by side. The lender's quantity surveyor confirms that the equity has gone into land and construction before the first advance, so that if the project stalls early the loss falls on the developer's money. The lender also reads what counts as equity: land at its purchase price or at a higher valuation, deferred fees, and a mezzanine loan presented as the developer's own funds give very different protection.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// WHAT IT IS NOT

Loan to cost sets how much of the project the bank funds; equity first sets when the developer's share goes in. A project can meet its loan-to-cost limit with the equity drawn pro rata alongside the loan.

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