Development Finance

Development Finance for experienced and first-time property developers

Property development in the UK, whether for resale, investment, or personal use, offers lucrative opportunities. Yet, high costs can be prohibitive, and developers' cash is typically already tied up in existing developments. Development Finance offers a solution at any stage of your project. It provides tailored loans that fund everything from land purchase to obtaining planning, site clearance, construction, equipment hire, materials, contractor payments - even marketing costs. 

Don't let financial constraints limit your ambitions. Explore development finance with us today and kickstart your projects.

We arrange development finance for experienced and new developers across residential, commercial, and semi-commercial development schemes. Our solutions finance ground up developments (new-build), property renovations, change of use, conversions, and cashing-out equity of existing developments.

We source best-rate development finance from our extensive network of private development lenders, family offices, investors and private equity.

Contact us first for a no-obligation quote. We're ready to help.

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Our development finance service

Development finance from £200,000 to £250,000,000

  • LTVs up to 60% of purchase price
  • LTCs (Loan-to-cost) up to 90%
  • LTGDVs up to 70% (up to 100% development funding with additional security)
  • 100% Build costs
  • Joint venture finance available
  • Terms up to 24 months

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Financing Property Development

How can I finance property development?

Property development is funded through debt- or equity-based financial products, including loans, investments, mezzanine finance, and structured finance. Our range of development finance products is featured below.

Land Bridging Loan

Land Bridging

A Land Bridging Loan is a fast financing solution for purchasing land, with or without planning. It enables investors, developers and speculators seize time-critical land opportunities, such as: purchasing Residential land, Commercial land, Agricultural land (pasture and arable) and Development land (including Greenfield and Brownfield sites, garden plots, ransom strips, woodland and carparks).

Property Refurbishment Loans

Property Refurbishment Loans

Property Refurbishment Bridging Loans finance both light and heavy property refurbishment projects, including: Loft conversions, Airspace/Rooftop development, Extensions or Basement digs on residential investment properties such as Student Let, HMO refurbishments and renovations. This finance is also suitable for commercial renovation projects such as Hotels, Offices, Pubs, Retail and Warehouses.

Property Conversion Financing

Property Conversion

Property conversion finance is specialised short-term finance enabling developers to purchase and transform a building's use or structure, commonly used for converting commercial or agricultural properties into residential dwellings. Offices, Barns, Outbuildings, Hotels, Warehouses, and Utility Buildings can all be converted into dwellings, and this finance can cover purchase costs and 100% of build costs.

Ground Up Development Finance

Ground Up Development

Ground up development finance is secured short-term debt or equity-based financing for constructing new buildings on bare land. It provides a finance facility to developers for projects involving the construction of a property from scratch. We arrange ground-up development finance for residential, semi-commercial, and commercial schemes, covering all stages from pre-planning finance, financing land purchases, development, and exit finance.

Senior Debt Finance

Senior Debt

Senior debt development finance is the highest prioritised form of debt-based finance for property development, used by developers at any project stage. It's popular with lenders as it provides lower risk due to its repayment prioritisation being above all other debt obligations for repayment in the case of bankruptcy, attracting the lowest interest rates. It's suitable for funding one or multiple small—to large-scale property developments.

Stretched Senior Debt Finance

Stretched Senior
Debt Finance

Stretched senior debt development finance is designed for property developers, combining senior debt development finance and mezzanine finance elements. It offers higher loan-to-cost (LTC) or loan-to-value (LTV) ratios than traditional senior debt alone. This financing approach enables developers to secure a larger portion of the project’s total cost through debt, reducing the amount of equity they need to contribute

Mezzanine Finance


Mezzanine finance "tops up" an existing loan on a development. Secured faster than equity financing, it allows for quicker project commencement. Developers and business owners use mezzanine finance to retain more equity in their development and maintain control over their project or company. Developers use mezzanine development finance to fund various stages of their projects. If you need additional funding quickly, we're likely to be able to help.

100% Structured Finance

100% Structured

100% Structured Development Finance refers to a financing arrangement in which the entire cost of a property development project is covered through debt without requiring the developer to contribute any equity (sponsor equity). We can help secure 100% Structured Finance for property development in the UK by using a mix of senior debt development finance, mezzanine finance and equity finance to cover the project's total cost.

Subordinated Debt Finance

Subordinated Debt

Subordinated Debt Development Finance is a type of financing used primarily in property development. This form of finance fills the gap between senior debt, typically provided by banks or traditional lenders, and the equity the developer needs to fund a project. It is termed "subordinated" because this debt has a lower priority for repayment in case of default, sitting below the senior debt in the capital stack.

Preferred Equity Finance

Preferred Equity

Preferred Equity Development Finance is a type of real estate financing where investors provide capital in exchange for equity shares in a development project but with preferential treatment over common equity holders. This form of financing sits between debt and common equity on the capital stack, offering a hybrid risk-return profile.

Equity Finance


Equity Development Finance for property development refers to capital investment in a property development project in exchange for ownership equity. This type of finance involves raising funds by selling shares or stakes in the development project to investors. These investors become partial owners and share in the potential profits of the project but also bear a portion of the risk.

Joint Venture Finance

Joint Venture

Joint Venture (JV) Development Finance is a collaborative arrangement where two or more parties (typically a property developer and a financier or another developer) come together to share the risks and rewards of a property development project. JV finance is often used when the parties involved want to pool their resources, expertise, or capital to undertake a development project that might be too large or risky for one party to handle alone.

Build To Let Finance

Build To Let

We arrange fast build to let finance for landlords and property investors for residential, commercial and mixed-use rental properties who need access to both the finance for the initial build of their rental property and access to longer term refinancing options.

Developer Exit Finance

Developer Exit

Our development exit finance, also known as Sales Exit Finance, allows you time to finish up your project, market the development & complete the sale of your asset or obtain longer term financing. Refinancing a completed development enables developers to negotiate more favourable interest.

Development Finance Criteria

What are the lending criteria for development finance?

You'll need to meet certain criteria to be eligible for development finance. Whilst this varies from lender to lender, you'll achieve the best rates and terms when you have a solid track record of completing successful developments, an honest and reliable financial history, and a clean credit record. Lenders also consider the project's planning status, project schedule, your contractor's experience, anticipated development costs and projected sale price (Gross Development Value). The table below shows the lending criteria you'll need to meet. 

Loan to gross development value (LTGDV) 70% maximum (100% with additional security)
And 100% Build financing
Loan term 3 to 24 months
Loan amount £200,000 up to £250m
Interest options Rolled-up, retained or serviced
Interest rates From 0.44%
Decision Immediate decision in principle
Completion From 3 days to 3 months (Depending on the type of finance required - call us today for more info)
Early repayment fees None
Availability England, Scotland, Wales and Northern Ireland & in some cases parts of Europe
Individuals, Companies, SPVs
No credit & adverse credit considered
Exit strategy Sale or refinance

If you're unsure about the criteria, call our experts, who will be able to help. 

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Finance For Experienced & First Time Developers

Get a no-obligation 
development finance quote

Use the quick enquiry below to obtain an accurate cost of development finance.

Development Finance Rates

What are the rates for Development Finance?

Development finance rates vary between 0.44% and 1.35% per month. Every developer and development is unique, and lenders' interest rates will reflect those nuances.

The interest rates developers access for property development finance are determined by 9 key factors.

  • Lender's Assessment. The lender's assessment of the project's risk profile and the developer's creditworthiness plays a significant role in determining the interest rate. A lower perceived risk and higher creditworthiness may result in a lower interest rate.
  • Collateral Equity Available. The percentage of the development's value that the lender is willing to finance, represented as loan-to-gross-development-value (LTGDV), can influence the interest rate. Higher LTGDV ratios will result in higher interest rates to compensate for increased risk. Similarly, when other equity ratios, such as Loan-to-value or Loan-to-cost, are used to assess the project, the higher the ratio percentage, the higher the interest rate.
  • Value of the development scheme once building work is completed
  • Loan Term. The length of the loan term impacts the interest rate. Shorter loan terms may have lower rates, while longer loan terms may come with slightly higher rates to account for the extended repayment period.
  • Market Conditions. Overall market conditions, including BoE rate trends and economic factors, influence the interest rate on property development finance. Lenders adjust their rates in response to changes in the broader financial landscape - and sometimes even pause deploying funds altogether.
  • Project Specifics. The specifics of the development project, such as its purpose, location, size, scope, Gross Development Value (GDV) and potential profitability, can affect the interest rate. Projects with higher perceived risks or greater complexity will incur higher interest rates.
  • Developer Experience. The developer's track record and experience in property development impact the interest rate. Lenders offer lower rates to experienced developers with a proven history of successful projects.
  • Loan Amount. The size of the loan influences the interest rate. Larger loan amounts may qualify for lower interest rates, while smaller loans may incur slightly higher rates.
  • Type of Financing. The type of financing being used, such as senior debt, mezzanine financing, or equity financing, can affect the interest rate. Each type of financing carries different risk profiles, which will be reflected in the interest rate offered.

Call our experts to access the latest rates. They'll advise you of the rates on offer for your project. 

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Key point

Experienced property developers with more established track records will generally benefit from the most competitive interest rates for development finance due to the lender's reduced risk. However, we're happy to work with first-time property developers and will make a lending decision based on the strength of the proposed developer's project. Speak with one of our experts about your project today.

Get expert assistance today.

To find out the latest rates and terms of your development finance,
call our expert team on 01202 612934 today - we're ready to help!

Bridging Loan For Property Development

2024 Property Development Finance Guide

What is Development Finance?

What is Development Finance?

"Development finance" is a financial product for funding real estate development projects. These projects include constructing, renovating, or converting properties for residential, commercial, industrial, or mixed-use purposes.

Specialised lenders, such as private investors, private equity firms, development finance institutions, or banks, typically provide development finance. 

Development finance provides developers with the capital needed to buy land, obtain or change planning permissions (planning gain), and cover demolition and site clearance costs, construction costs, and other project expenses. It plays a critical role in facilitating the development of new properties and revitalising existing ones.

Lenders offering development finance typically assess projects' viability based on the developer's experience and track record, development scheme feasibility and profitability, market conditions, regulatory considerations, and collateral availability. They structure the finance facility tailored to each project's specific needs and risks, with terms and conditions that reflect the project's stage of development, expected timeline, and potential returns.

Overall, development finance supports the growth and transformation of real estate markets by providing developers with the financial resources needed to bring projects from conception to completion.

What can Development Finance be used for?

What can Development Finance be used for?

Development finance can be used at any stage of development for any property. It fuels various real estate projects, from residential to mixed-use and commercial developments, infrastructure, and brownfield rejuvenation. It supports ground-up construction, renovations, and diverse initiatives, shaping urban landscapes and meeting market demands. 

Below, we examine each common use of this type of finance.

Residential Developments

This includes the construction of single-family homes, townhouses, condominiums, apartment buildings, and housing estates. Residential development finance is typically for ground up development on bare land. The work involved typically includes site clearance, groundwork, levelling, drainage and construction. Property development finance typically pays for the land procurement, planning costs and materials, and the construction and fit-out of the property. 

Mixed-use Developments

Mixed-use (semi-commercial) development finance can fund projects that combine residential, commercial, and/or industrial components within a single development, such as mixed-use buildings, urban developments, or master-planned communities.

Commercial Developments

Commercial development finance can fund the construction or renovation of retail spaces, office buildings, shopping centres, hotels, restaurants, and other commercial properties.

Industrial Development

Development finance can support the development of industrial properties such as warehouses, distribution centres, manufacturing facilities, and industrial parks.

Buying Land

Residential, commercial, agricultural land (pasture and arable) and development land, including greenfield and brownfield sites, garden plots and ransom strips.

Planning Gain

Development finance can fund the professional fees associated with planning gain, a process which involves applying for and receiving planning permission for a property or land that enhances its development value. 

Land Subdivision

Development finance can be used to fund land subdivision projects, where larger parcels of land are divided into smaller lots for residential, commercial, or industrial use.

Permitted Development

Developers using Permitted Development Rights (PDR) can complete certain building works and changes of use without needing to apply for planning permission. These include home extensions, agricultural enhancements, and changes of use, such as converting office spaces to residential areas.

Light Property Refurbishment

Light property refurbishment is the simplest and quickest form of property development. The term "property flipping" typically involves light property refurbishment. Property flipping is when you buy a property in poor condition below market value, complete light refurbishment, and then sell it quickly for a profit. Light property refurbishment involves cosmetic enhancements and updates to a property's interior or exterior without significant structural changes. It focuses on improving the property's appearance and appeal through decorating, refinishing floors, updating fixtures and fittings, and refreshing or installing new bathrooms or kitchens.

Heavy Property Refurbishment

Heavy property refurbishments involve comprehensive and substantial renovations or improvements to a property, typically requiring significant alterations to its structure, layout, systems, or appearance. This refurbishment may include structural changes such as removing or adding walls and floors, digging a basement, modifying the building's footprint with an extension or rooftop development, or renovating core components like the roof, foundation, windows, and doors. Heavy refurbishments often entail upgrades or replacements of essential systems such as plumbing, electrical wiring, heating, ventilation, and air conditioning (HVAC). These projects require substantial time, resources, and expertise and aim to transform the property's condition and functionality to optimise its value.

Property Conversion

Development finance can support property conversion projects, where existing buildings or structures are repurposed for new uses. This may include converting old warehouses into loft apartments, transforming historic buildings into boutique hotels, or repurposing former industrial sites for mixed-use developments.

Airspace Developments

Airspace development, also known as airspace utilisation or vertical development, involves the construction or expansion of buildings upward into the airspace above existing structures. This type of development typically occurs in densely populated urban areas where land is scarce or expensive.

Infrastructure Development

Development finance can support infrastructure projects related to property development, such as roads, utilities, drainage systems, and other essential infrastructure needed to support new developments.

Brownfield Development

Development finance can fund the redevelopment of brownfield sites, which are abandoned or underutilised properties with potential environmental contamination. Brownfield development finance may cover cleanup costs, remediation efforts, and redevelopment expenses.

Affordable Housing

Development finance can fund affordable housing projects aimed at providing housing options for low- and moderate-income individuals and families. This may include subsidised housing developments, affordable rental properties, or affordable homeownership opportunities.

Luxury Development

Development finance can also support luxury development projects targeting high-end markets. This may include luxury residential properties, high-end retail developments, luxury hotels, and upscale mixed-use developments.

How does development finance work?

How does Development Finance work?

Development finance provides developers with funding for various stages of a property development project, from land acquisition to construction and completion.

Development finance funds real estate projects from planning to completion. Developers submit project details for due diligence, followed by structured financing arrangements. Funds are allocated for land acquisition, planning, site clearance, and construction, disbursed in stages. Lenders monitor progress, ensuring effective fund utilisation. Upon completion, developers repay the loan using proceeds from property sales or refinancing.

The steps in the process of obtaining development finance are explained below.

Step 1. Application and Due Diligence

Developers apply for development finance, providing project details, including current and anticipated planning status, construction plans, build schedules, budgets, timelines, and financial projections. Lenders conduct due diligence to assess the project's feasibility, risks, and potential returns. This may involve reviewing the developer's track record and financial history, their contractor's credentials, conducting site visits, and analysing market conditions.

Step 2: Loan Structuring

Based on the project's requirements and risk profile, lenders structure financing arrangements tailored to the developer's needs. This may include determining the loan amount, interest rate, repayment terms, collateral requirements and stage draw-downs. Loans will be provided as lump-sum amounts or disbursed in stages as the project progresses. 

Step 3: Land Acquisition & Planning

Development finance can be used to purchase land for the development project. Lenders will provide financing up to 70% loan-to-value (LTV) of the land's purchase price if it has planning or up to 50% if it doesn't. The developer must contribute enough equity to meet the lender's LTV requirements by putting cash into the project or using additional security to achieve 100% finance. Development finance can also fund obtaining or enhancing planning to gain a more favourable development opportunity.

Step 4: Site Clearance & Construction Financing

Once the land is acquired, development finance funds the project's construction phase. This includes covering demolition, site clearance, security, materials, labour, contractors, subcontractors, suppliers and professional fees. Funds will be disbursed periodically based on project milestones or as needed to meet construction expenses. This ensures that the project progresses smoothly and that all parties are compensated for their work and materials.

Step 5: Monitoring and Drawdowns

Throughout the project, lenders monitor progress by conducting regular site inspections to ensure that funds are being used effectively and that the project remains on track. Disbursements are made in stages based on completed work or verified expenses, with lenders and reviewing documentation to validate claims.

Step 6: Completion and Repayment

Once the development is complete, the property is sold, leased, or refinanced to generate returns. Lenders will require developers to have a viable exit strategy in place to repay the loan. This may involve selling the completed property, securing long-term financing, or retaining the property for rental income or future development. Developers use the proceeds to repay the development finance, including principal and interest. Depending on the loan terms, repayment may be made in full or instalments over time.

How does Property Development Finance differ from a Bridging Loan?

How does Property Development Finance differ from a Bridging Loan?

The main difference is that property development finance is typically a longer-term financing solution for large-scale projects, such as new builds, conversions, and ground-up developments, whereas bridging finance is a shorter-term financing solution to solve immediate needs. Development finance is typically used when bridging finance is either too short a term or cannot offer the capital needed to progress a project, and it is a specialist financial product designed around the timescales and requirements specific to the construction sector.

Difference Property Development Finance Bridging Finance
Purpose Property development finance is specifically designed to fund property development projects from start to finish. It provides financing for the acquisition of land, construction costs, and other associated expenses, such as planning and professional fees. Bridging finance is intended to provide short-term funding to bridge the gap in the borrower's finances. It is often used by property developers to secure properties quickly or to fund time-sensitive projects because it is quick to arrange.
Terms Property development finance typically offers longer loan terms compared to bridging finance, ranging from several months to several years. These loans are structured to align with the project's timeline and typically involve staged drawdowns based on project milestones. Bridging finance typically has shorter loan terms than property development finance, ranging from a few weeks to 12 months. These loans are designed to provide immediate access to funds, with quick approval processes and minimal documentation requirements.
Repayment Structure Repayment of property development finance usually occurs at the end of the project once the property is completed and sold or refinanced. Developers may have the option to repay the loan in full or in instalments over time, depending on the terms of the loan agreement. Developers often refinance a development several times throughout the project's lifecycle to access better rates as the property's value increases. Repayment of bridging finance usually occurs within a relatively short timeframe, often when the property is sold or refinanced. The loan may be repaid in full, along with any accrued interest and fees, once the exit strategy is executed. It's less common for borrowers to require refinancing than development finance, as doing so would indicate failure of the original repayment plan. A robust exit strategy is a requirement for obtaining such finance.

The two parts to Development Finance

The two key parts of Development Finance

The process of Development Finance contains two key parts: purchasing the site and developing it.

1. Funding for the site purchase

This initial stage predominantly involves financing the acquisition of the site and can extend to enhancing the planning to maximise the development potential. Whether it involves acquiring land to construct new properties or refurbishing existing structures, this phase lays the foundation for the following stage of development.

2. Funding for developing the site

The subsequent stage pertains to financing the construction works integral to the project. Often disbursed in stages aligned with the project's timeline, these funds facilitate the progression of the build process, ensuring a steady flow of financial support for construction activities.

Types of Property Development Finance

What are the types of Property Development Finance?

The finance a developer chooses will depend on their specific needs and how they wish to structure their finance. At a glance, this development finance graphic shows how each type of finance works together.

Property Development Finance Options

A broker can help developers understand which types to use in which circumstances. However, as this type of finance is typically only available to experienced developers, the borrower will have at least a basic understanding of the required finance. 

What is debt-based development finance?

Debt-based finance describes a loan facility in which the developer pays interest and fees for the finance and then repays the capital sum at the end of the term. Debt-based finance includes senior debt, stretched senior debt, mezzanine or subordinated debt finance, or a combination of two or more.

What is equity-based development finance?

Equity-based finance describes a partnership approach to development finance in which the developer offers shares in the company that owns the development instead of using debt-based finance. Equity-based finance includes preferred equity, equity or joint venture, or a combination of two or more.

What is 100% Structured Development Finance?

100% Structured Finance combines multiple forms of debt and/or equity-based finance to achieve 100% of the required finance.

Property development finance comes in a variety of different forms, these include:

Senior Debt Finance

What is Senior Debt Finance for property development?

Senior debt finance is the most common form of property development finance, providing funds for the purchase of land, construction and/or the refurbishment of property. The funds available are agreed between the lender and the borrower, and the borrower is typically required to place a security against the loan (typically the resulting property asset being developed). Senior debt development finance is typically the most secure type of property development finance, and the lender will have a first claim on the development’s cash flow and proceeds from the sale. 

Stretched Senior Debt Finance

What is Stretched Senior Debt Finance for property development?

Stretched senior debt finance is a variant of the above senior debt finance, except that it is typically provided at higher loan-to-value (LTV) levels and can incur higher interest rates than traditional senior debt finance. These higher loan amounts and interest rates increase the lender's risk, so stretched senior debt development finance is provided only to more established or experienced property developers with solid track records and impeccable credit histories. 

Mezzanine Finance

Mezzanine Finance

Mezzanine finance is a hybrid form of debt, or debt and equity finance, in which the lender provides a loan and may also provide equity investment to finance a development. In return for providing the mezzanine finance to the borrower at higher LTVs, typically, a higher interest rate is charged. In the instance of equity investment, the lender will also receive shares in the company that owns the development. 

100 Percent Structured Development Finance

100% Structured Finance

100% Structured finance is where 100% of the property development cost is provided by the lender, who lends based on the gross development value (when complete) rather than the inherent risk of the development itself. The lender will typically place more stringent requirements on the borrower and will likely require additional security (e.g. additional land or assets) as collateral for the finance.

Subordinated Debt Development Finance

Subordinated Debt Finance

Subordinated debt finance is a form of debt financing for property development in which a lender provides a loan but takes a ‘second seat’ to the more senior debt provider regarding loan repayment priority. Subordinated debt finance is only provided to borrowers who have obtained first-charge debt from a senior lender, and the subordinated debt lender will take a lower priority in repayment terms.

Preferred Equity Finance

Preferred Equity Finance

Preferred equity finance provides equity investment in the company that owns the development with certain predetermined rights (‘preferred’) over the other equity owners in terms of repayment and dividend payments. The terms of the preferred equity arrangement are pre-agreed and often give the lender greater control over the project than possible through traditional equity investment. 

Equity Development Finance

Equity Finance

Equity Finance is a form of investment used in property developments. The investors give funds for a share of the equity, allowing them to take a share of the profits but also any potential losses resulting from the development. As the lenders are taking a greater risk in this form of finance, they are typically compensated in proportion to the risk taken. 

Joint Venture Property Development Finance

Joint Venture Finance

Joint venture finance is a form of development finance in which two or more parties pool their funds to finance a property development. The joint venture partners pool their resources and funds to purchase assets or finance developments and typically receive a proportion of the profit in return. Joint venture finance is often used when the development costs are too significant for a single investor or group of investors to finance independently.

Considerations for Financing a Property Development

Considerations for Financing a Property Development 

Developers should consider the following 8 factors when deciding which type of financing to use for their development.

  1. Project Scope and Scale. The scale and complexity of the project will influence the type of financing required. Larger projects may necessitate specialized financing options such as property development finance or construction loans, while smaller projects may be adequately funded through traditional bank loans or personal savings.
  2. Risk Profile. Developers should assess the risk associated with the project and choose financing options that align with their risk tolerance. For example, projects with higher risk levels may require equity or mezzanine financing to supplement traditional debt financing.
  3. Financial Health and Creditworthiness. Developers' financial reliability, creditworthiness, and track record play crucial roles in determining the availability and terms of financing. When evaluating development finance applications, lenders assess factors such as good credit history and financial accounts. 
  4. Project Timeline. The timeline for completing the project can impact the choice of financing. Short-term projects may be better suited for bridge loans or lines of credit, while long-term projects may require permanent financing options such as mortgages.
  5. Collateral and Guarantees. Lenders may require collateral or personal guarantees to secure financing, especially for high-risk projects. Developers should consider the implications of providing collateral or guarantees and weigh them against the benefits of accessing financing.
  6. Interest Rates and Fees. Developers should compare interest rates, fees, and repayment terms different lenders offer to choose the most cost-effective financing option. They must also consider the overall cost of financing over the project's lifespan, including both upfront fees and ongoing interest payments.
  7. Flexibility and Terms. Developers should evaluate the flexibility and terms offered by various financing options to ensure they align with their project's needs and objectives. Some financing options may offer more flexibility in terms of repayment schedules, prepayment penalties, and loan covenants.
  8. Exit Strategy. Developers should have a clear exit strategy for repaying the financing once the project is completed. Whether through property sales, refinancing, or rental income, developers should consider how they plan to exit the financing arrangement and ensure it aligns with their long-term goals.

Carefully considering these factors will help you choose the most suitable financing option to support your development project's success while minimising risks and maximising returns.

What are the benefits of Development Finance?

What are the benefits of Development Finance? 

The main benefit of development finance is that it provides a mechanism for accessing funding when a developer doesn't have the financial means to finance a development. Other benefits include the versatility and flexibility of allowing developers to access funds for a range of projects, including the building of housing, offices, industrial units, retail units, and other commercial projects.

Developing a property from scratch can have enormous profit potential but is often cost-prohibitive without external financial support. Development finance enables property developers to access the funds necessary to complete their projects while providing them with a range of financial benefits that can help offset the costs of securing a loan and ensure the successful completion of the project. 

Development finance can help developers manage costs, as funds are usually released as the project progresses, with an initial lump sum on day one, followed by additional release of funds as development milestones are passed.

What are the features of Development Finance? 

Development finance typically has a long repayment period, allowing borrowers to benefit from additional time to repay the loan and potentially lower interest rates when compared to bridging loans. In addition, lenders often offer flexible repayment plans, enabling developers to get the best terms to suit their individual needs. 

Development finance can also be used to finance various related expenditures, including the purchase of materials, construction costs, professional fees, and taxes.

Depending on the agreement between the lender and the borrower, funds may also be released in stages, ensuring that funds are distributed based on the project's progress, which is critical to reducing interest costs.

How are the stage releases agreed?

How are the stage releases agreed? 

The stage releases of development finance are typically agreed upon in advance between the developer and the lender. The exact release structure and any penalties for failing to meet specific phase completion deadlines, as well as the agreed exit strategy deadline, are detailed in the contract between the developer and the lender.

The finance can be released in as few or as many stages as the two parties agree. The most common approach is to offer the finance in two parts: the first draw is typically for site purchase, and the second and subsequent draws are for the construction phase.

Where the development project requires additional funding, the lender may allow the developer to top-up their loan using mezzanine finance. 

The developer may also choose to refinance the development, typically when the project is almost complete or completed but not yet sold. Refinancing at this stage often offers the developer access to better rates.

How much can I borrow?

How much can I borrow using Development Finance? 

The amount of money you can borrow will depend on various factors, such as the value of the project, the expected profits, the loan-to-value ratio (LTV), and the loan-to-cost (LTC) ratio.

The LTV ratio is the amount of property value that can be used to cover the loan amount, while the LTC ratio is the amount of money being borrowed compared to the project's total cost.

The LTV and LTC ratios are important factors in determining the maximum development finance amount and should always be considered when applying for a loan. The maximum loan amount will also depend on the terms and conditions of the specific offer, such as the repayment terms, the interest rate, and the amount of deposit required.

 loan-to-value ratio (LTV), loan-to-cost (LTC) or loan-to-gross-development-value (LTDGV) exceeds a certain threshold, and it's best to speak with a broker to understand how much you can borrow using these different ratios. This means that buyers must have some form of collateral, such as land or property, that can be used as security for the loan and may also need to provide a personal guarantee.

How are LTGDV, LTC and LTVs Calculated? 

The Loan-to-Gross Development Value (LTGDV) is the ratio of the total loan amount to the total Gross Development Value (GDV) of the project; this is the estimated value of the finished development once it has been completed and fitted out.

The loan-to-cost (LTC) ratio is the difference between the total loan amount and the estimated total costs of the project. At the same time, the loan-to-value (LTV) ratio is the difference between the loan amount and the property's current market value. 

The LTGDV, LTC, and LTV ratios must be considered to calculate the maximum loan amount a lender can provide for a development finance project.

A higher LTGDV, LTC, and/or LTV will leave the developer with less profit potential and increase the lender's risk, so each lender has a maximum LTGDV, LTC, and/or LTV they're willing to lend to.

How is the maximum loan calculated? 

The maximum loan amount for a development finance project is usually determined by a combination of the loan-to-gross development value (LTGDV), loan-to-cost (LTC), and loan-to-value (LTV) ratios. The minimum loan amount is usually determined by the estimated costs of the project and the target returns. 

The maximum development finance amount is also affected by market conditions and the rate of development, so lenders will often also take into account any feedback from planners or local authorities and the estimated completion time of the project. In addition, lenders may impose additional criteria, such as having collateral to offer as security for the loan. 

What are the costs of development finance?

What are the costs of Development Finance?

The costs of property development finance can be broken down into two main categories: interest payments and loan fees.

Regarding the interest payments, this will depend on the loan size, the borrower's creditworthiness, the loan term, and the specific type of loan requested. Various short-term, long-term, or fixed-rate loans can have different interest rates.

When it comes to loan fees, a series of fees must be taken into account, such as setup fees, application fees, and miscellaneous administrative costs. This is why it is important to know all the costs associated with property development financing when attempting to secure such a loan.

What are the fees for development finance?

When researching a loan, borrowers must consider all the associated fees besides the interest rate since these fees can increase the total cost of the loan.

Fixed-cost charges are typically paid upfront and can include the application fee, the arrangement fee, the exit fee, and the valuation fee. Additional miscellaneous fees may include late payment fees, administrative costs, and more. Fees can vary from lender to lender, depending on the type of development finance and the specific terms of the loan agreement.



Property development finance provides investors and developers with the necessary capital to construct new properties. By understanding the costs and fees of this loan, developers can better evaluate their options and make an informed decision.

With a development finance broker on board, borrowers can more easily source and compare different options, accessing the best overall deal.

We're property and development finance experts who arrange financing for developers, sourcing and securing the best deal for you from UK specialist lenders, private equity firms, investors, and family offices.

Get expert assistance today. We're here to answer any questions about development finance.

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