Specialist funding for ground-up construction and major refurbishment projects, providing flexible financing solutions for property developers.
Development finance is a specialist form of property lending designed specifically for developers undertaking construction projects, from ground-up residential schemes to commercial conversions and heavy refurbishments. Unlike traditional mortgages, development finance is structured around the project lifecycle, with funds released in stages as construction progresses and verified by independent quantity surveyors.
The UK development finance market offers funding from £150,000 to £100m+, catering to first-time developers through to experienced housebuilders and commercial developers. Lenders assess projects primarily on the viability of the scheme—the relationship between costs, end value (GDV), and profit margins—rather than solely on the borrower's personal income.
This makes development finance accessible to developers who may not qualify for traditional lending but have viable, well-planned projects. Whether you're building your first development or your fiftieth, understanding how development finance works is essential for maximising returns and minimising risk.
Initial tranche released on completion to fund land acquisition. Typically 60-70% of purchase price or current market value. Some lenders offer "Day 1 Uplift" where they'll lend against a higher value if you've purchased at a discount.
Construction costs released in arrears against QS-certified progress. Typically monthly drawdowns once work is verified. Up to 100% of build costs funded, reducing developer equity requirement.
Loan repaid from unit sales or refinance onto term lending. Interest typically rolled up throughout and paid at exit. Development exit finance available for completed schemes awaiting sales.
Understanding the right scenarios ensures you're using this finance type strategically.
New build houses and apartments from single units to large-scale developments.
Office-to-residential, commercial-to-residential, barn conversions using Permitted Development Rights.
Substantial renovation projects requiring structural works, including sub-division into multiple units.
Offices, retail, industrial, and mixed-use schemes with strong pre-lets or pre-sales.
| Cost Component | Typical Range | Notes |
|---|---|---|
| Interest Rate (Annual) | 8% - 14% | Calculated on drawn funds only |
| Arrangement Fee | 1.5% - 2% | Added to loan or paid upfront |
| Exit Fee | 0% - 1.5% | Some lenders charge, many don't |
| Valuation Fee | £1,500 - £5,000+ | Based on GDV |
| Legal (Lender) | £2,000 - £5,000+ | Complex deals cost more |
| Monitoring Surveyor | £500 - £1,500/visit | Per drawdown inspection |
Submit project details including site, planning status, costs, GDV, and experience. We assess viability within 24 hours.
Receive indicative terms from suitable lenders within 48-72 hours, including rates, fees, and lending parameters.
Lender instructs valuation and legal due diligence. Typically 2-4 weeks depending on complexity.
Full underwriting and credit committee approval. Complex cases may require additional information.
Funds released for land acquisition. Build drawdowns begin as works progress.
| Aspect | Development Finance | Alternative |
|---|---|---|
| Funding Speed | Terms in 48hrs, complete in 2-4 weeks | Banks take 8-12 weeks minimum |
| Build Cost Funding | Up to 100% of construction costs | Banks rarely fund build costs fully |
| Experience Required | First-time developers considered | Banks require extensive track record |
| Flexibility | Bespoke structures for each project | Rigid criteria and processes |
Development finance is typically released in stages as the project progresses. An initial advance covers land purchase and planning costs, followed by staged releases as construction milestones are achieved. A monitoring surveyor inspects the work at each stage to authorize the next drawdown, ensuring funds are released safely and in line with project progress.
Development finance costs typically include an arrangement fee (usually 1-2% of the loan), interest (charged monthly on drawn funds), a monitoring surveyor fee, legal fees, and a valuation fee. Interest can be rolled up and paid at the end of the term or serviced monthly, depending on your preference and the lender's criteria.
Yes, while lenders prefer experienced developers, many will consider first-time developers with a strong project plan and professional team in place. You may need to demonstrate relevant construction or property experience, provide a detailed business plan, and potentially accept slightly more conservative loan terms. Some lenders may also require additional security or a more experienced joint venture partner.
Most development finance lenders look for a minimum profit of 15-20% on GDV (Gross Development Value) to ensure the project is viable and provides a sufficient buffer for unexpected costs. They will assess your development appraisal carefully, including build costs, professional fees, finance costs, and sales assumptions to ensure the project stacks up financially.
Experience requirements vary by lender and project complexity. For smaller schemes (1-4 units), some lenders accept first-time developers with strong professional teams. Larger projects typically require demonstrable track record. Consider partnering with experienced contractors or starting with simpler refurbishment projects if you're new to development.
With typical 65% LTGDV and 85-90% LTC parameters, developer equity usually represents 10-15% of total project costs. For a £1m project, expect to contribute £100,000-£150,000. Some lenders offer higher leverage for experienced developers, while first-timers may need more equity.
Build costs are released in arrears following verification by an independent monitoring surveyor. The process: complete a stage of works, request drawdown, QS inspects and certifies, lender releases funds (usually 5-7 working days). Most lenders operate monthly drawdown cycles.
Lenders typically require 5-10% contingency in your cost plan. If costs exceed this, additional equity is usually required first. Some lenders may increase facilities if headroom exists. For time overruns, most loans include extension options for additional fees. Communicate early with your lender if you foresee issues.
Dedicated development finance specialists with deep market knowledge.
Access to an extensive panel of specialist lenders.
Adhering to strict professional and ethical standards.
Proven track record in property finance.
Our local specialists understand the property market in your region and can provide tailored advice.
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