What Lenders Need Before They Will Offer Development Finance

The strongest applications answer the credit questions before the lender has to ask them. They present a coherent project, identify the risks openly and show how those risks will be managed. This guide explains what lenders normally need to see before they can assess a development-finance proposal properly.

Start with a coherent summary of the whole scheme

A lender should be able to understand the transaction quickly and accurately. That does not mean reducing a complex development to a few optimistic headline figures. It means presenting the relevant information in a logical order.

A useful initial summary should cover:

• the site address and current ownership;
• the proposed development and number of units;
• the planning position;
• the purchase price or current site value;
• build cost and total project cost;
• expected Gross Development Value;
• the amount of finance required;
• cash equity being introduced;
• the proposed build programme;
• the intended exit through sale, refinance or a combination of both; and
• the developer, contractor and wider professional team.

If the lender has to piece the project together from separate emails, drawings, spreadsheets and incomplete documents, the application begins at a disadvantage. Development finance is a specialist credit decision. Clarity makes the lender’s work easier, but it also exposes weak assumptions early enough to address them.

For an overview of how a facility is structured, including staged drawdowns and monitoring, see our Development Finance guide.

Planning permission is important, but it is not the whole planning position

Lenders need to know whether the project has a workable route to commencement and completion, not simply whether there is a planning reference number. The usual evidence includes the decision notice, approved plans and details of any pre-commencement conditions.

Depending on the scheme, the lender may also need to understand planning obligations, Community Infrastructure Levy exposure, ecology matters, highways requirements, building-control position and any party-wall or neighbour issues. A permission with significant conditions outstanding may still be financeable, but the programme needs to allow for those matters and the borrower needs to show how they will be discharged.

Planning permission and building-regulations approval are separate requirements. Government guidance confirms that building-regulations approval may still be required even where planning permission has been granted. Read the GOV.UK guidance.

The cost plan needs to be detailed, credible and complete

Build cost is one of the central underwriting risks in development finance. Lenders will normally look beyond a single high-level figure and ask whether the budget reflects the actual scope of work and the present stage of design.

A robust cost pack will usually include a detailed cost plan, contractor quotation or tender information, professional fees, statutory costs, contingency, interest and finance costs, sales or letting costs, and a sensible allowance for items that are not yet fully priced.

Lenders will often stress-test costs and programme length. If the scheme only works when every item is delivered at the lowest estimate and on the original timetable, it is unlikely to be regarded as resilient.

The delivery team must be capable of completing the project

A lender is assessing the borrower as well as the site. Relevant experience does not necessarily mean having completed an identical project, but it does mean the borrower should be able to demonstrate a credible route to delivery.

The application should identify the developer, contractor, architect, project manager, quantity surveyor, planning consultant, structural engineer and selling or letting agents where relevant. The lender will want to know who is responsible for what, how they are appointed and whether the programme depends on any key party who has not yet been secured.

For less experienced developers, a stronger professional team, realistic leverage and clear oversight can make a material difference. Our First-Time Developer Finance guide explains the issues that commonly matter for newer developers.

The development value must be supported by evidence

Gross Development Value is important because it affects the lender’s view of leverage and repayment. It should be based on evidence rather than an untested aspiration.

A lender will usually consider a valuation from an appropriate surveyor, comparable evidence, the proposed specification, local demand and the sales or rental strategy. Where the exit is refinance, the rental evidence and likely investment valuation may matter as much as the assumed sale value.

It is sensible to consider what happens if values are lower than expected or sales take longer. A scheme that retains adequate headroom under a more cautious value assumption is generally easier to place than one which only works at the top end of the range.

The borrower’s equity and financial position matter

Development lenders normally expect the borrower to have meaningful equity at risk. The precise amount varies by lender, scheme type, experience and security, but the lender will want to understand where the equity is coming from and whether it is genuinely available.

That means being ready to provide evidence of funds, details of any other borrowing secured against the site, company information, personal asset and liability information where required, and an explanation of the wider group structure.

Transparency is important. Existing liabilities do not automatically prevent funding, but undisclosed obligations or a funding gap identified late in the process can undermine confidence in the application.

The programme needs to be realistic

Programme delays affect interest costs, contractor arrangements, the timing of sales and the period available to repay the loan. The programme should show the major stages: acquisition, discharge of conditions, enabling works, construction, practical completion, sales or lettings, and exit.

Lenders will look for dependencies and pressure points. For example, a programme may be vulnerable if it assumes an immediate start before pre-commencement conditions are discharged, if utilities have not been addressed or if the contractor’s availability is uncertain.

The exit strategy must stand up to scrutiny

Every development loan needs a clear repayment route. That may be sales, refinance, retained units or a combination. The lender will consider not only the intended route but also whether it is realistic in the context of the location, product type, market evidence and timing.

If the exit is sale, explain the marketing approach, expected pricing, absorption rate and any sales already agreed. If the exit is refinance, provide evidence of rental demand, expected income, likely loan-to-value and the borrower’s ability to satisfy the criteria of a long-term lender.

Prepare a lender pack rather than sending information piecemeal

The most efficient route is to prepare the relevant information before approaching the market. A well-organised lender pack will often include:

• a project summary and funding request;
• planning documents and approved drawings;
• cost plan, tender information and build programme;
• valuation evidence or comparable information;
• sales, rental or refinancing evidence;
• details of the borrower and project team;
• evidence of cash equity and any existing borrowing; and
• a clear explanation of the intended exit and contingency plan.

Where a scheme is more complex, a conventional appraisal may not show how cost movement, lower values and programme delays interact. Our Development Risk Review provides a structured way to test those assumptions before lenders are approached.

What commonly weakens a development-finance application?

Weak applications are rarely caused by one issue alone. More commonly, the lender sees a combination of incomplete evidence, optimistic assumptions and an unclear plan for resolving outstanding matters.

• an unsupported or overly optimistic GDV;
• a cost plan that does not reflect the full project scope;
• insufficient contingency;
• planning conditions or technical matters without a clear solution;
• an unrealistic programme;
• limited borrower equity or an unexplained funding gap;
• a delivery team with unclear responsibilities; or
• an exit strategy based on assumptions rather than evidence.

How EAS Finance can help

EAS Finance is a credit broker, not a lender. We help borrowers present development proposals in a way that allows appropriate lenders to assess the transaction efficiently. That means understanding the security, leverage, cost plan, borrower position, delivery risks and exit before approaching the market.

Early preparation cannot remove every risk from a development, but it can improve the quality of the funding conversation and reduce avoidable delays.

Frequently asked questions