Pref Equity is a form of hybrid of debt and equity financing used to fill the gap between what the Bank will fund and what the borrower is able to contribute towards the Total Developments Costs (TDC) of a project.

Pref Equity financing can give the Pref Equity provider the rights to convert to an ownership and control position in the development company under certain circumstances. These may include the loan not being paid back in time and in full or there being a prolonged un-remedied event of default relative to any loan documentation including senior lender or the Pre Equity facility itself.