Three stacked boxes are a simple way to see where the money in a big deal actually comes from

A useful way to picture capital stack questions is three boxes stacked on top of each other. The bottom box is the senior loan. That is the bank, the cheapest money in the stack, and first in line if everything goes wrong. The top box is the owner's own equity, the most expensive money, last in line, entitled to whatever is left after everyone else is paid. The space between those two boxes is where most of the interesting decisions happen. If the bank will only lend so much and the owner cannot or will not put in the rest, someone else fills the middle. That money costs more than the bank's money and less than giving away ownership outright, and it sits behind the bank in line, which is exactly why it costs more. As a rough marker, that middle layer of capital typically wants somewhere in the 10 to 15 percent range. If a deal cannot support paying that rate, it is not yet a deal, it is a wish dressed up as one. The habit worth building is to stop thinking of a deal as one loan and one buyer. Most real transactions have at least three layers of capital, each with a different price and a different place in line, and understanding that structure is often the difference between a deal that closes and one that just sounds good on paper.