First Time Development Finance Guide

First-time developers are not a separate category because lenders use a different form of development finance. The difference is evidential. An experienced developer can point to completed schemes, previous cost control and established professional relationships. A new developer has to demonstrate the same underlying competence in other ways.

The practical objective is therefore not to disguise inexperience. It is to make the rest of the transaction strong enough that the lender can understand where the execution risk sits and how it is being controlled.

What the lender is really assessing

Four questions tend to sit behind most development-finance decisions: is the proposed completed value supportable, can the works be delivered for the stated cost and programme, does the borrower and professional team have the capacity to execute the scheme, and is there a credible route to repay the debt?

For a first-time developer, the third question receives more attention because the borrower cannot rely on a personal track record. That does not mean a first scheme is automatically weak. A straightforward project, sensible leverage, a credible main contractor and experienced professional advisers can materially change the risk picture.

The first scheme matters

A first development should not automatically be the smallest scheme available, but complexity deserves respect. Unresolved planning, unusual title arrangements, structural uncertainty, complicated phasing or an aggressive sales assumption all create risks before the borrower’s lack of experience is considered.

A project with fewer moving parts gives the lender less to underwrite and gives the developer more room to learn the funding process without simultaneously solving several unrelated problems. This is one reason a modest conversion or single-site scheme can be easier to finance than an apparently more profitable but operationally complex development.

Equity and liquidity are not the same thing

One of the easiest mistakes on a first development is to calculate the required equity contribution and assume that figure represents the whole cash requirement. It may not.

Development facilities are commonly drawn in stages. Some costs sit outside the lender’s funded budget, and expenditure can arise before the corresponding drawdown is available. Cost increases or delays can also create additional interest and working-capital pressure.

The relevant question is therefore not only how much equity the lender requires at completion. It is how much cash the developer may need at the point of greatest exposure during the build, and what resources remain if the original appraisal changes.

Our separate article, 100% Build Costs Funded. So Why Do I Still Need Cash?, examines this issue in more detail.

Compare structures, not headline rates

Development finance is often compared by monthly rate and maximum leverage. Those figures matter, but they do not describe the whole facility. A lower rate can be poor value if the structure requires materially more equity than the borrower can sensibly commit, if drawdown mechanics do not match the build programme, or if the facility leaves too little time for a realistic exit.

Equally, a high-leverage facility is not automatically superior. Borrowing more can preserve capital at the outset while reducing the project’s ability to absorb valuation weakness, cost overruns or delay.

The right comparison is therefore between complete funding structures: day-one advance, funded costs, drawdown mechanics, finance cost, cash requirement, covenants, term and exit. Pricing only becomes meaningful once lender fit has been established.

Smaller schemes are not simply scaled-down large schemes

Small developments can encounter a different lender universe because minimum facility sizes, monitoring requirements and legal costs affect the economics. A £250,000 facility may be simple in absolute terms but still uneconomic for a lender whose processes are designed around multi-million-pound developments.

This makes lender selection important. The question is not merely whether a lender says it will consider small schemes, but whether it regularly completes them and whether its monitoring, valuation and legal requirements remain proportionate to the transaction.

On smaller schemes, contingency also deserves particular attention because a modest absolute overrun can consume a large proportion of the borrower’s available cash. A percentage that appears comfortable on the appraisal may translate into relatively little money once work starts.

Class MA and conversion schemes

Class MA permitted development can allow qualifying buildings in Use Class E to change to residential use, subject to the conditions and prior-approval process under the General Permitted Development Order. The planning route is not the same as having no planning risk. The precise building, use history, local constraints and matters considered through prior approval still need to be checked. The Planning Portal continues to identify Class E to residential conversion as a prior-approval route in 2026.

For finance, the main point is certainty. A lender assessing a conversion before the planning position is sufficiently established has to underwrite both the property transaction and the risk that the intended use cannot proceed as assumed. Confirmed prior approval, where required, removes part of that uncertainty but does not replace due diligence on building condition, buildability or exit demand.

Planning Portal: prior approval guidance

HMO and retained-investment projects

A development or refurbishment intended to become an HMO has two financing stages to think about: the works facility and the long-term investment exit. The final property needs to satisfy the intended mortgage lender as well as local planning and licensing requirements.

In England, a property is generally an HMO where at least three tenants from more than one household share facilities, while mandatory HMO licensing applies to many properties occupied by five or more people forming more than one household. Local authorities can apply additional licensing schemes, so the local position must be checked rather than assumed. GOV.UK HMO guidance.

For a retained scheme, the refinance should be tested before the development facility is committed. The completed valuation, achievable rent, lender’s rental coverage requirements and the amount of capital left in the deal can all change the viability of the intended exit.

What a strong first application looks like

A lender should not have to reconstruct the development from fragments. A strong submission normally brings together the planning position, acquisition details, build-cost schedule, programme, professional team, valuation assumptions, borrower resources and exit into one coherent story.

The important point is not presentation for its own sake. Good information allows weaknesses to be identified before valuation and legal costs are incurred. If the scheme relies on a high GDV, very tight contingency, maximum refinance leverage or an optimistic programme, that should be visible before lender selection rather than after the facility is underway.

Use the right level of modelling

A straightforward first scheme does not necessarily require a complicated financial model. The EAS Project Finance Analyser provides a simpler way to test the main acquisition, development, finance and exit assumptions.

Where funding is staged, the cash requirement changes materially through the project, or several sensitivities need to be examined together, the EAS Finance Workspace provides the more detailed route.

The objective in either case is not to predict lender approval. It is to understand the scheme well enough that the lender is being approached with a considered funding proposition rather than an optimistic appraisal.

Current-reference note: Class MA information has been checked against current Planning Portal/GOV.UK material. Personal guarantees can expose a director’s personal assets if the borrowing company does not meet the guaranteed debt; the Insolvency Service updated its guidance on this in May 2026. Market rates, lender leverage limits and completion times are deliberately not presented as universal current figures because they vary by case and lender.