Development finance
Funding released in stages against a scheme's cost plan, secured on the site and repaid from sales or a refinance once the units are complete.
Development finance is less a loan you receive than a schedule you draw against, agreed before a spade goes in the ground. Get that schedule right at the outset — honest on costs, realistic on timing — and the facility does its job quietly in the background while you build. That upfront work is where we spend most of our time on a development case.
The parameters
Where this product sits.
Ranges across the market, so you can sanity-check any quote — ours or anyone else’s — before you take it seriously.
- Loan to GDV
- Up to 65–70%
- Gross development value is the surveyor's figure, not the agent's. Expect it back lower than your appraisal.
- Loan to cost
- Up to 85–90%
- Land plus build plus fees plus finance costs. Your equity is the balance, and it goes in first.
- Day-one land advance
- Up to 60–70%
- Of purchase price or open market value, whichever is lower. Planning-gain uplift is treated cautiously.
- Term
- 12–24 months
- Sized to the build programme plus a sales period. Overruns are the most common cause of extension fees.
- Contingency
- 5–10% of build
- Required by most lenders and drawn only with the monitoring surveyor's agreement.
These are indicative market ranges rather than a quotation — they are here so you can sanity-check any offer you are shown. Your own terms will be priced on the asset, the borrowing entity, your trading history and the exit, and we will put real figures in front of you on the first call.
Typical cases
What it is used for.
Ground-up residential
From a pair of semis on an infill plot to multi-plot sites. Funded on land value at the start and build costs in arrears against certified work.
Permitted development conversion
Offices, agricultural buildings and retail converted to residential. The existing structure changes how the day-one advance is sized.
Heavy refurbishment
Structural alteration, reconfiguration, extension, change of use. Below that threshold a refurbishment bridge is usually cheaper.
Part-built and stalled sites
Taking on a scheme someone else started. Priced on the cost to complete and how much existing work the monitoring surveyor will certify.
In detail
How it works in practice.
How drawdowns actually work
The land advance is released at completion of the purchase. After that, build costs are drawn in stages — most commonly monthly, in arrears, against work already carried out and signed off by the lender's monitoring surveyor.
That means you fund each stage first and are reimbursed after. It is the single most misunderstood part of development finance, and it is why a scheme with a thin working capital position runs into trouble even when the facility itself is adequate.
Drawdowns are not instant. Between the surveyor's visit, the report and the transfer, ten to fourteen days is normal. Build that into your programme and your subcontractor payment terms rather than discovering it in month three.
What the monitoring surveyor is really checking
They are appointed by the lender, paid for by you, and they are not there to inspect quality on your behalf. Their job is to confirm that money already released was spent on the scheme, that certified work is genuinely complete, and that the remaining budget will still finish the job.
The report that matters most is the initial one, before drawdown. It tests your cost plan, programme and contingency against what the surveyor thinks the scheme really costs. If it comes back saying the build budget is 12% light, the lender resizes the facility and you find the difference.
We put the appraisal together with that review in mind — costed properly, with a realistic contingency and a programme that survives a wet February — because a cost plan marked down at initial report costs you time you do not have.
Experience, and what to do without it
Lenders price development risk substantially on the developer, not just the scheme. A first-time developer on a six-unit site is a different proposition from the same site in the hands of someone who has completed four.
That does not close the door. It changes the structure: a smaller first scheme, a main contractor with a track record on a fixed-price contract, a higher equity contribution, or a joint venture partner. Any of those can make a first scheme fundable.
What does not work is presenting a first scheme as though experience is not a question. Underwriters ask it in the first ten minutes.
Before you sign
Four things worth checking.
Interest is charged on the drawn balance
Not on the facility. Drawing slowly and accurately is worth real money over an eighteen-month term.
Rolled interest comes out of your GDV
It is deducted from the facility, so the loan-to-GDV headline already includes finance costs you have not yet incurred.
Allow a real sales period
A term sized to the build programme plus four weeks leaves little room if the market is slow. Building in a realistic sales window avoids extension fees later.
Exit onto term debt is not automatic
If the plan is to hold and refinance rather than sell, test the term lender's criteria before you draw the development facility.
Typically 10% to 15% of total project cost, and it goes in first — usually as part of the land purchase, before the lender releases anything.
Lenders look at total cost, not just the land: purchase price, build, professional fees, finance costs, contingency and sales costs. Equity calculated only against the land price is the most common reason a scheme is short at the start.
You can fund the land purchase, but not on development terms. A site without consent is bridged or funded as land, at a materially lower loan to value, and the development facility replaces it once permission is granted.
Some lenders will agree a development facility subject to a satisfactory consent, which converts on grant. Worth setting up in advance rather than starting again afterwards.
Tell the lender early. An overrun flagged in month eight with a revised programme is an extension conversation. The same overrun discovered by the monitoring surveyor in month sixteen is a different and much more expensive one.
Extensions typically carry a fee and, where the market has moved, a repricing. They are almost always available where the scheme is progressing and the exit is intact.
Usually yes, as part of total project cost, provided they are in the cost plan at the outset. Fees discovered after the facility is sized come out of your contingency or your pocket.
Community infrastructure levy and section 106 payments are often required at commencement, which can be an early and substantial cash call. They belong in the cash flow from day one.
Not always, but the more the scheme relies on a single main contractor, the more likely a lender is to want a formal contract, collateral warranties and evidence the contractor can carry the job.
Self-managed schemes with a package of trades are fundable and common at smaller scale — typically up to around six units. Above that, most lenders start asking for a main contractor and a formal contract, and we will tell you early which camp your scheme falls into so the procurement route is settled before terms are sought.
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