Stretch Loan Financing
High-Leverage Financing Without Equity Dilution
Access Higher Leverage Than Traditional Lenders Offer
Stretch loans combine senior debt and preferred equity into a single financing instrument, providing sponsors with loan-to-cost ratios of up to 93%—significantly higher than what conventional lenders typically offer. This hybrid structure allows you to minimize your initial capital contribution while maintaining your upside potential.
Unlike traditional financing arrangements that require sponsors to navigate separate senior debt and equity layers, stretch loans streamline the capital stack into one relationship with our family office investors.
Types of Stretch Loans
Senior Stretch Loans
Secured by a first mortgage on real estate projects owned by sponsors. This structure provides our family office investors with maximum security while offering you access to high-leverage capital in a senior lien position.
Junior Stretch Loans
Secured by second mortgages on real estate projects or UCC-1 financing statements on sponsors’ membership interests in LLCs—similar to how mezzanine loans are structured. Junior stretch loans layer behind existing senior debt to fill the gap between your senior loan proceeds and total project costs.
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When to Use a Stretch Loan
Consider a stretch loan instead of incurring the high cost of capital from hard money lenders when:
- You need financing to fund the completion of a project midway through construction
- You want to reduce carrying costs by paying a pay rate of 4% to 6% instead of prefunding an interest reserve at a much higher rate on a hard money loan
- You are unable or unwilling to sign with recourse on a conventional bank loan
- You need to close on the acquisition of land associated with a development project, especially when facing a “drop dead” closing date
Benefits to Sponsors
High Leverage Without Equity Dilution
Stretch loans allow you to obtain high-leverage financing without diluting your equity stake, enabling you to maintain larger upside potential while minimizing your initial capital contribution.
Lower Pay Rate Than Alternative Debt Sources
To help reduce carrying costs during predevelopment or transitional phases, our family office investors can reduce the “pay rate” on stretch loans to 4% to 6% per annum, with unpaid interest accruing and payable when you pay back the loan. This is substantially lower than the rates charged by hard money lenders or land lenders.
Faster Closing with Greater Certainty
Stretch loans can be executed more quickly than traditional preferred equity investments, providing you with faster access to capital and greater certainty of closing—critical when you’re facing tight deadlines.
Tax-Deductible Interest
Unlike preferred equity investments, interest paid on a stretch loan is tax-deductible for sponsors, providing an additional financial benefit that improves your after-tax returns.
Stretch Loans vs. Traditional Structures
In a traditional capital stack, sponsors might raise senior debt at 65% loan-to-cost plus preferred equity for an additional 28%, resulting in complex multi-party arrangements. A stretch loan consolidates this into a single 93% loan-to-cost instrument with a blended return of approximately 14% to 16%—simplifying the financing process while providing you with comparable leverage.
The key advantage: when structured as a stretch loan, our family office investors earn a fixed return whether or not you hit your proforma numbers. This alignment of interests—combined with the simplified documentation and faster execution—makes stretch loans an efficient alternative to layered debt and equity structures.
Get Started
If you’re exploring stretch loan financing for your commercial real estate project, contact Ron Zimmerman at (513) 621-1031 or ronz@netleasex.com to discuss your specific situation and determine whether a stretch loan is the right solution for your capital needs.
White Paper
Using Preferred Equity to Increase Real Estate Investors’ Leverage and Enhance Returns
Original: September 2022 | Updated: September 2025
🎧 Listen to 39-minute podcast discussion
This whitepaper discusses how NetLeaseX works with real estate investors to structure investment relationships with “below the radar” high net worth investors, family offices, registered investment advisors, equity funds, and institutional investors to help sponsors — including non-institutional sponsors and even first-time sponsors — raise preferred equity so that they can close more deals and earn more fees.
Articles by Ron Zimmerman
Strategize With Preferred Equity
The Scotsman Guide | December 2018 (Featured Article)
🎧 Listen to 14-minute podcast discussion
This article gives an overview on how real estate investors can increase leverage by raising preferred equity to fill the gap between the amount an investor can raise in senior debt financing and the sponsor's equity investment. This article further discusses various ways preferred equity investments can be structured including, for example, creating one or more tiers, waterfall priority order (e.g. A/B structure vs. pari passu), recourse, repayment schedules, control rights, and capital shortfall requirements.
NetLeaseX Capital Offers Family Offices Direct Access to Rescue Financing Investments in Real Estate
Famcap.com | October 2023
🎧 Listen to 14-minute podcast discussion
This article discusses how family offices and other sophisticated real estate investors can access NetLeaseX’s platform to freely review NetLeaseX’s pre-screened, "investment-ready" transactions, including rescue financing, preferred equity and co-GP investment opportunities. The article further discusses why NetLeaseX believes that a better way to invest in commercial real estate in today's market is to provide rescue financing to sponsors, particularly in multifamily.
The Power of Stretch Loans for Family Office Investors
Famcap.com | May 2024
🎧 Listen to 12-minute podcast discussion
This article explores how commercial real estate investors can secure custom stretch loans from high net worth and family office investors, combining senior debt and preferred equity features to obtain high-leverage, short-term bridge financing with favorable pay rates.
Throw Out A Lifeline
The Scotsman Guide | July 2020 (Featured Article)
This article discusses how real estate investors may be able to raise rescue financing to cover operating losses and/or mortgage payments during the Covid-19 crisis. Raising rescue financing is especially important for real estate investors who may face substantial liability due to personal loan guarantys if their lender were to foreclose; thus, triggering a forced sale at a fire-sale price.
Ride To The Rescue
The Scotsman Guide | August 2020
As a follow-on article to “Throw Out A Lifeline”, this article discusses how rescue financing, in effect, works like bridge equity, a temporary infusion of cash from an investor that well eventually be bought out via refinancing or sale when real estate markets normalize. This article further lists various ways how rescue financing can be structured both as debt and equity investments.