Development Finance UK
Staged funding for ground-up development, conversion and substantial refurbishment, structured around project cost, GDV, borrower equity, build programme and a credible exit.
Minimum development finance facility: £350,000
We normally respond on the same working day.
Project viability considered against completed value, total cost, leverage and cost to complete.
Access to a broad lender panel, matched to scheme type, leverage, experience and exit.
Construction funding released in tranches as certified work progresses through the build.
Development finance considered across England, Wales, Scotland and Northern Ireland.
Development finance is built around the project, not just the property.
Development finance is a short-term specialist facility used to fund construction, conversion or substantial refurbishment. Unlike a standard mortgage, the loan is drawn progressively and assessed against the viability of the completed scheme as well as the value of the site today.
The lender will normally assess both Loan to Cost (LTC) and Loan to Gross Development Value (LTGDV). The actual facility is then shaped by the lower of those constraints, together with the developer’s equity contribution, experience, build programme, contingency and exit.
The principle is consistent with the government’s financial viability guidance for housing-led projects: expected value must be assessed against development costs with a proper allowance for profit. A lender will then apply its own credit criteria, leverage limits and evidence requirements to the particular scheme.
A property development loan is therefore normally structured as staged development finance rather than as a conventional mortgage. Funds are released as the project progresses and the lender continually considers the cost to complete and the remaining route to repayment.
This distinguishes development finance from bridging finance, which is typically structured around the current security and exit, and from land finance, which may fund a site before construction begins.
Development finance is not simply expensive bridging. The lender is underwriting a construction project, the developer, the contractor, the cost plan, the programme, the GDV and the exit.
Development schemes commonly considered by specialist lenders
The financing structure changes with the complexity of the works, planning position, borrower experience and intended exit.
Ground-up residential
New build from foundations, from individual houses through to larger multi-unit schemes.
Mixed-use development
Residential and commercial schemes where values, sales and long-term refinance need to be considered separately.
Conversions
Commercial-to-residential and other change-of-use projects involving substantial works and planning considerations.
Heavy refurbishment
Structural works or major refurbishment where a conventional bridge is not an appropriate way to fund the build.
HMO conversion
Conversion to licensed HMO accommodation, including schemes where Article 4 or planning conditions affect delivery.
Part-built schemes
Completion or rescue funding where a project has stalled and the lender needs a clear cost-to-complete appraisal.
What development lenders will look at
A development application is a credit case, not simply a property valuation. Lenders want evidence that the scheme can be completed, sold or refinanced, and repaid within the agreed term.
Experience
Comparable schemes, track record, professional team and whether the borrower has the practical capability to deliver the project.
Planning
Planning status, pre-commencement conditions, statutory approvals and any unresolved matters capable of delaying the build.
GDV evidence
Independent valuation evidence supporting the completed value rather than an appraisal based only on the developer’s expectations.
Build cost
An itemised cost plan, contractor capability, contingency and enough funding headroom to deal with realistic overruns.
Equity & leverage
The developer’s cash contribution, LTC and LTGDV, together with whether meaningful equity remains at risk throughout the scheme.
Programme
A realistic timetable that allows for construction, statutory processes, practical completion and sufficient time to achieve the exit.
Site & title
Access, covenants, tenure, boundaries, rights and any legal issue capable of impairing value or delaying completion.
Exit
Sale or refinance supported by realistic evidence, with a contingency if values or sales timing do not behave as originally assumed.
What will a lender make of your development?
The appraisal brings the site, acquisition cost, build budget, professional fees, contingency, GDV, equity, finance cost, programme and exit into one funding picture.
A scheme can show an attractive headline profit and still be difficult to fund. The lender is interested in where the cash is required, how much debt is outstanding at each stage, whether enough money remains to complete the works and what happens if the assumptions move.
Before approaching a lender, you can run the development through the EAS Finance Workspace. It brings the funding assumptions together and shows how leverage, cash requirement, finance cost and exit pressure change as the project moves.
See what the numbers say before a lender does.
Model the development using your actual site cost, build budget, GDV, equity, programme and finance assumptions. Then change the important variables and see what happens to cash required, leverage, finance cost and the exit.
A rate means very little until you put it into the project.
Development finance pricing varies with leverage, developer experience, scheme type, facility size, security, programme and lender appetite. There is no single rate that accurately describes the whole market.
We use current lender market information available to us to form a realistic financing assumption once the transaction is properly understood. If you already have indicative lender terms, you can use those instead.
The more useful question is what that rate does to the development. The effect is not limited to the interest line. Finance cost can alter the cash required, project margin, funding headroom and the amount of time available for the exit to work.
What happens if the finance costs more than expected?
Do not test only the rate you expect. Run the project at a realistic current assumption, then increase the assumed annual rate by one or two percentage points and see what changes. The same principle applies to a longer build period or slower exit.
Development finance is released in stages as the build progresses.
The facility is agreed at the outset, but construction funds are normally released in tranches. A monitoring surveyor checks progress and confirms whether each drawdown can be made.
Application & terms
Site, planning, cost schedule, GDV, track record and exit are reviewed before indicative terms are requested.
Valuation & appraisal
The lender assesses current value, completed GDV, build costs and the overall development appraisal.
Monitoring surveyor
An independent surveyor reviews the cost plan and monitors construction throughout the facility.
Legal & initial advance
Security and legal due diligence are completed before the acquisition or initial construction advance is released.
Staged drawdowns
Further funds are released against certified work as the scheme progresses through the agreed programme.
Completion & exit
The facility is repaid through unit sales, investment refinance or development exit finance.
Leverage is constrained by both cost and completed value.
The lender will generally cap the facility by reference to both LTC and LTGDV. The actual structure depends on the project, experience, planning position, security and exit.
The headline interest rate is only one part of development finance cost.
The appraisal should include lender fees, valuation, monitoring surveyor, legal costs, broker fees and the timing of interest as funds are drawn.
| Cost component | How to treat it | Notes |
|---|---|---|
| Interest rate | Use a realistic current assumption | Pricing varies materially by leverage, scheme, borrower experience and lender appetite. Test the impact within the appraisal rather than relying on a generic headline rate. |
| Arrangement fee | Include in total finance cost | The lender’s fee may be calculated on the gross or net facility depending on the structure. |
| Monitoring surveyor | Scheme dependent | Commonly includes an initial appraisal followed by inspection or drawdown-related charges. |
| Valuation fee | Scheme dependent | Independent valuation is normally required, with cost affected by scheme size and complexity. |
| Legal fees | Variable | The borrower will commonly meet their own legal costs and the lender’s reasonable legal costs. |
| Broker fee | Agreed in writing | EAS Finance confirms any applicable broker fee before work begins. |
The risks that can weaken an otherwise attractive development.
A scheme can look profitable on paper and still be difficult to finance if the assumptions leave too little margin for delay, cost movement or a weaker-than-expected exit.
Completed values come in below the appraisal, reducing profit and potentially pushing leverage above the lender’s expected LTGDV.
Costs exceed budget and contingency, requiring additional borrower equity before the lender will continue releasing funds.
Replacing a contractor mid-build can add cost, delay and uncertainty while the lender reassesses the programme and cost to complete.
The build runs beyond the planned term, increasing finance cost and potentially requiring an extension or alternative short-term finance.
A higher rate or longer borrowing period can reduce margin and increase the developer cash required to keep the project funded.
Units complete but sales take longer than expected, extending the interest-bearing period and bringing the maturity date closer.
Find out where the project starts to become uncomfortable.
A central case tells you what happens if the assumptions prove broadly correct. A lender will also be interested in what happens when costs, values, finance or timing move against the project.
The lender needs to understand how the development loan will be repaid.
Exit is assessed alongside the build programme because the facility must remain adequate through completion and into the period required to sell or refinance.
Sale of completed units
The most common exit. The lender will stress-test assumed sale values and sales timing rather than accept the headline GDV at face value.
Investment refinance
Completed property is retained and refinanced onto buy-to-let, HMO or commercial term finance, subject to value, income and lender criteria.
Explore buy-to-let finance →Development exit finance
A short-term refinance can repay the development lender once the scheme is complete or substantially complete, providing more time for remaining sales or the longer-term refinance.
Explore development exit finance →Different projects create different lender questions.
Use the more specific guidance where the type of development or the borrower’s experience materially changes the way the case is likely to be assessed.
Development finance and bridging finance solve different problems.
Using the wrong product can create a funding gap. The important distinction is whether the lender is funding a construction project or primarily lending against an existing asset with a short-term exit.
| Factor | Development finance | Bridging finance |
|---|---|---|
| Primary use | Construction, conversion and substantial refurbishment. | Acquisition, timing gaps and shorter-term property-backed requirements. |
| Assessment basis | GDV, project cost, developer, contractor, programme and exit. | Current property value, security, leverage and exit. |
| Drawdown | Staged tranches aligned to construction. | Usually one principal advance at completion. |
| Monitoring | Monitoring surveyor commonly required. | Usually less extensive unless material works are involved. |
| Pricing | Reflects construction, leverage and delivery risk. | Reflects asset, leverage and exit risk. |
Development finance guidance
Frequently asked questions
What will a lender make of your development?
If the project is still being tested, run the numbers through the Workspace. For live development finance requirements of £350,000 or more, send us the site, planning position, acquisition cost, build budget, GDV, equity, programme and exit.
This page is produced for general information about commercial property development finance and does not constitute personal financial advice. EAS Finance is a trading name of Elite Admin Services Ltd (FRN 1044838), appointed representative of White Rose Finance Group Ltd (FRN 630772), authorised and regulated by the Financial Conduct Authority. EAS Finance is a credit broker, not a lender.
Rates, leverage and lending parameters are indicative and subject to lender appetite, valuation and change. Current terms should always be confirmed for the specific development.