Development Finance
Ground-up development loans for residential, mixed-use and commercial schemes. GDV-based lending for experienced and first-time developers.
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No upfront fees · Business enquiries only · Min. £25,000
What is Development Finance?
Development finance is a specialist form of property lending used to fund the construction of new buildings from the ground up. Unlike standard bridging finance, development loans are structured around the project's gross development value (GDV) ” the projected end value once construction is complete ” and funds are released in staged drawdowns as construction progresses, verified by an independent monitoring surveyor.
- Funds land/site acquisition plus construction costs
- Drawdowns released in arrears as works are certified
- LTV assessed against GDV ” typically up to 65“70%
- Monitoring surveyor appointed throughout the project
- Terms typically 12“36 months depending on scheme size
How Does Development Finance Work?
Project Assessment
The lender evaluates the development appraisal ” site cost, build cost, GDV, profit margin and exit. A minimum gross development profit of 20“25% is typically required.
Land / Site Drawdown
An initial advance is made against the land or site acquisition, subject to the day-one LTV limit (typically 60“70% of purchase price).
Construction Drawdowns
Build costs are drawn down in arrears ” typically monthly or at agreed milestones ” following inspection and sign-off by the monitoring surveyor.
Monitoring Surveyor
An independent RICS-qualified monitoring surveyor is appointed by the lender. They inspect works, certify completed stages and approve each drawdown. Regular site access and reporting is required.
Practical Completion
On completion of construction, the monitoring surveyor issues a practical completion certificate. The developer then pursues the exit ” sale or refinance to investment finance.
Exit & Redemption
The development loan is repaid from sale proceeds or refinanced to a term mortgage, buy-to-let portfolio loan or commercial mortgage.
How is Development Finance Secured?
Development finance is secured by a first legal charge over the development site. The charge covers the land and all structures built on it during the term. Some lenders also take debentures over the developer\'s SPV company. The security value increases as construction progresses, which is why drawdowns are released in stages rather than as a single advance.
Exit Strategy
All lenders require a credible exit strategy before funds are released. Common exit routes include:
- Sale of completed units ” residential or commercial
- Refinance to a buy-to-let mortgage on completed residential investment units
- Refinance to a commercial or semi-commercial term mortgage
- Portfolio refinance across multiple completed units
- Sale of the development site prior to completion (with planning)
Is Development Finance a Good Idea?
Advantages
- Access to significant capital for ground-up construction
- Interest rolls up during construction ” no monthly cash drain
- GDV-based lending maximises available loan amount
- Structured drawdowns align funding with actual build costs
- Suitable for SPV/limited company structures
Considerations
- Higher cost than investment mortgages ” reflect the increased lender risk
- Monitoring surveyor adds cost and requires site access and reporting
- Overspend on build costs can exhaust the facility ” contingency is essential
- Planning delays or cost overruns can create pressure on the exit timeline
- First-time developers face higher rates and lower LTVs
How to Secure Development Finance
Prepare a Development Appraisal
A credible appraisal showing site cost, build cost (with contingency), GDV, finance costs and profit is essential. Lenders use this to assess viability.
Obtain Planning Permission
Most development lenders require at least outline planning permission. Some will fund pre-planning site acquisition on a bridging basis.
Appoint Professionals
An architect, quantity surveyor and (for first-time developers) a project manager add credibility to the application and reduce lender risk.
Submit Enquiry
Share your development appraisal, planning documents, site details and developer CV. We match the scheme to appropriate lenders on our panel.
Formal Application
A detailed application including planning consent, build cost schedule, architect drawings, developer track record and exit strategy is submitted to the chosen lender.
How Much Can I Borrow?
Development finance loan amounts are structured around GDV rather than current site value, enabling developers to access more capital than traditional LTV-based lending.
- Loan to GDV: up to 65“70% for residential schemes
- Loan to cost: up to 85“90% of total project cost with some lenders
- Day-one land advance: typically 60“70% of site/land purchase price
- Minimum loan: £250,000 for most development lenders
- Maximum: £25m+ for established developers on strong schemes
- First-time developers: lower LTVs and additional requirements apply
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How Quickly Can I Get a Loan?
Development finance typically takes 4“8 weeks from application to first drawdown ” longer than bridging due to the complexity of the appraisal, planning review and legal work. Experienced developers with simple schemes and existing professional relationships may complete faster.
Eligibility Criteria & How to Apply
- UK-based limited company, LLP or partnership (personal name lending is rare)
- Full planning permission or outline consent in place
- Credible development appraisal showing minimum 20% gross profit on GDV
- Experienced developers preferred ” first-time developers considered on smaller schemes
- Architect and quantity surveyor appointed
- Clear exit strategy ” sale or refinance
- Director adverse credit considered ” assessed against scheme strength
- Minimum loan £250,000 for most lenders
9 Example Uses of Development Finance
New-Build Residential
A developer builds 8 houses on a brownfield site. Development finance funds land purchase and construction; units are sold on completion.
Apartment Scheme
A 20-unit apartment block is developed in a city centre. GDV-based lending covers 85% of total costs; pre-sales support the exit.
Barn Conversion
A rural barn with planning for 4 residential units is funded. Planning certificate and architect drawings support the application.
First-Time Developer
An experienced builder moves into development. A smaller 3-unit scheme with a professional QS and project manager attracts a specialist lender.
Commercial-to-Resi
An office block with permitted development rights is converted to 15 apartments. Development finance covers acquisition and conversion costs.
Self-Build (via Company)
A director builds a high-value private residence through a limited company structure. Development finance funds the build; a mortgage refinances on completion.
Mixed-Use Development
Ground floor retail with 6 apartments above. A specialist lender with mixed-use appetite is identified.
Director with CCJs
A developer with historical CCJs ” now satisfied ” has a strong track record. A specialist lender assesses the scheme rather than the credit score.
Large Estate Development
A 50-unit scheme requires a phased facility. A senior debt plus mezzanine structure maximises LTC while limiting equity requirement.
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