Development finance

Development finance from £5m to £350m

Senior debt up to 72.5% of gross development value, stretched to 90% of costs with mezzanine, and joint venture equity above that. We structure the whole capital stack for your scheme, from land with planning to the exit, and run the lender process so you build on terms that fit the project rather than the lender.

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No credit search and no upfront fee.

development facilities: £5m to £350mdevelopment facilities
of gross development value: Up to 72.5%of gross development value
of total costs with mezzanine: Up to 90%of total costs with mezzanine
build terms: 12 to 36 monthsbuild terms

We fundResidential schemesBuild to rent and PRSPurpose-built student housingCommercial and mixed usePermitted development conversionsLater living and careIndustrial and logistics

The challenge

Why development funding is never one loan

A scheme has to be funded from site purchase to the last unit sold, and each stage carries a different risk. The developers who build most get each stage priced by the lender that suits it best.

Land comes before the facility

Sites need buying, or securing on option, months before planning and the build loan are in place. Bridging has to carry the land without eating the margin.

Equity is the scarce part

Senior lenders stop at around 60% to 65% of costs. Every pound of equity the developer has to find limits how many schemes can run at once.

Build cost and contractor risk

Lenders test the build contract, the contractor's strength and the contingency. Cost inflation or a contractor failure can stall drawdowns.

Programme and interest roll-up

Delays push up rolled interest and fees, which comes out of profit. A realistic programme and headroom in the facility protect the margin.

Sales pace and the exit

Facilities are repaid from sales or refinance. Slow sales or a softening market need an exit plan agreed at the start, not when the loan expires.

Monitoring, valuations and conditions

Every drawdown is signed off by a monitoring surveyor against the valuation and cost plan. Poorly prepared packs slow cash to site.

How we structure it

How we structure development funding

Most schemes we arrange use three or four of these layers, sized to the appraisal and the developer's equity.

Senior development finance

Ground-up and conversion schemes funded in stages against the build programme, with interest rolled up to completion.

£5m to £350m, up to 72.5% of GDV, 12 to 36 months

Stretch senior

A single facility at higher leverage in place of separate senior and mezzanine loans, with one set of documents and one monitoring surveyor.

Up to 72.5% of GDV and around 85% of costs

Mezzanine finance

Second-charge funding above the senior loan that reduces the equity the developer has to commit, under an intercreditor agreement.

Up to 90% of total costs combined with senior

Joint venture equity

Equity partners fund most of the developer's contribution in return for a share of profit, so experienced developers can run more schemes at once.

Above 90% of costs, profit share agreed per scheme

Land and planning bridging

Site purchase, pre-planning and site assembly funded fast, then refinanced into the development facility once planning is granted.

From 0.69% a month, up to 100% LTV with additional security

Development exit finance

Repays the development loan at practical completion, at a lower rate, while the remaining units sell or let.

From 0.69% a month, 1 to 24 months

Investment refinance on completion

Build to rent, student and commercial schemes refinanced onto long-term debt once stabilised.

Up to 75% LTV, from 1% over Bank Rate, up to 25 years

Example structure

An example development structure

An experienced residential developer secured a site with planning for 120 apartments in the South East. Gross development value is £60m and total costs £45m, including land at £9m. The developer wanted to commit as little cash as possible so it could start a second scheme the same year.

Why it worked

Senior and mezzanine together sit at 67.5% of GDV, inside the 72.5% limit, so both lenders priced keenly. The equity partner covered most of the remaining 10%, leaving the developer with 3% of costs in cash and its full team free for the next site. An exit facility was agreed in principle at the outset to cover any unsold units at completion.

Indicative structureIllustrative

Senior development facility at 62% of costs (46.5% of GDV): £27.9m
Mezzanine to 90% of costs: £12.6m
Joint venture equity partner (profit share): £3.15m
Developer cash in: £1.35m

£45m of total costs funded with £1.35m of developer cash

Illustrative example. Leverage, pricing and equity terms depend on the developer's track record, the scheme, the build contract and each funder's credit assessment.

Through a lender's eyes

What development funders look at

We prepare the appraisal, the cost plan and the developer profile the way a credit committee reads them, so the scheme is judged on its strengths.

Loan to GDV and loan to cost: Senior lenders work to up to 72.5% of GDV; total debt with mezzanine reaches up to 90% of costs. Both tests have to pass.
Profit on cost and on GDV: A healthy margin, typically 20% on cost or more, gives lenders comfort that sales or cost overruns will not wipe out the equity.
Track record: Schemes of a similar size and type delivered on time and budget. First-time developers can still fund, with a stronger professional team and more equity.
Build contract and contractor: Fixed-price or design-and-build contracts with a strong contractor, warranties and a realistic contingency, usually 5% or more.
Planning and site: Detailed consent, discharged pre-commencement conditions, title, ground conditions and Section 106 or CIL obligations.
Valuation and sales evidence: Comparable sales or rents supporting the GDV, and a credible absorption rate for the units.
Exit: Pre-sales, a forward sale, an agreed investment refinance or an exit facility that repays the loan if sales run slower.

What it is for

How property developers businesses use the funding

Ground-up residential and mixed-use schemes
Build to rent, student and later living
Office to residential and other conversions
Buying land with or without planning
Releasing equity from a scheme part way through
Refinancing an expensive or stalled facility
Exiting completed units onto cheaper debt
Running several schemes at once with JV equity

What we will ask for

Enough to get you indicative terms. Share it securely through your client account; nothing needs to be perfect first.

Development appraisal and cash flow
Planning consent and conditions schedule
Cost plan and build programme from the QS
Build contract and contractor details
Developer CV and track record schedule
Title and site information
Sales or letting strategy with comparables
Assets and liabilities of the principals
Company structure, including any SPV

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How it works

From first call to funds

1Day 1 to 3
Appraisal review
We stress test the appraisal, cost plan and programme and agree the right mix of senior, mezzanine and equity.
21 to 2 weeks
Funder approach and terms
Targeted approach to the development lenders and equity partners with appetite for the scheme size and type. Terms compared side by side.
33 to 6 weeks
Valuation, monitoring and credit
We manage the valuation, the monitoring surveyor's initial report, legal due diligence and the intercreditor between lenders.
46 to 10 weeks
First drawdown and build
Land and day one costs funded, then monthly drawdowns against certified progress, with us on hand through to the exit.

How development finance works

Development finance funds the purchase of a site and the cost of building on it. Unlike a mortgage, it is drawn in stages: an initial advance towards the land, then monthly drawdowns as the build progresses, each one certified by a monitoring surveyor against the cost plan. Interest is usually rolled up and repaid with the loan from sales or a refinance at the end.

Lenders size the facility on two tests at once: loan to gross development value, which looks at what the finished scheme is worth, and loan to cost, which looks at how much of the money the lender is putting in. Senior lenders go up to 72.5% of GDV. Combined with mezzanine, total debt can reach 90% of costs, and joint venture equity can fund most of the remainder.

Senior, stretch senior, mezzanine and equity

Senior debt is the cheapest layer and takes first charge over the site. Stretch senior combines senior and mezzanine into one facility, which is simpler to run and often quicker to complete. Mezzanine sits behind the senior lender under an intercreditor agreement and costs more, because it carries more risk, but it replaces equity that would otherwise be tied up in the scheme.

For developers who want to keep their own cash to a minimum, joint venture equity partners will fund most of the remaining contribution in return for a share of the profit. The right mix depends on the margin in the scheme, the developer's pipeline and how much of the profit is worth sharing to run more sites at once.

Larger schemes from £5m to £350m

We arrange development facilities from £5m to £350m. Larger schemes, including build to rent, student accommodation, later living and large mixed-use regeneration, are often funded by specialist debt funds, insurers and club deals between lenders, with forward funding or forward sales to institutional investors providing the exit. We run the process across the panel so the developer sees the full range of structures, not just the one a single lender offers.

Land, planning and exit finance

Most schemes start with bridging: buying land, funding pre-planning work or assembling a site before the development facility is in place. Bridging runs from 0.69% a month, up to 100% loan to value with additional security, and is refinanced into the build loan when planning is granted.

At the other end, development exit finance repays the build loan at practical completion and gives the developer time to sell the remaining units at full value rather than discounting them to meet a deadline. For schemes held as investments, we arrange long-term refinance once the property is let and stabilised.

What makes a scheme fundable

We review all of this before going to funders, so the lenders see a scheme that has already been tested, and the terms you receive reflect it.

A realistic appraisal with a healthy profit margin
Detailed planning with conditions understood
A fixed-price build contract and a contingency
A track record of similar schemes, or a strong team
Evidence for the end values and a clear exit

Talk it through

Tell us what you need and we will come back with an indicative structure, usually within a few working days.

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FAQs

Property developers finance questions

How much can I borrow for a development?

Senior lenders fund up to 72.5% of the gross development value. With mezzanine, total debt can reach up to 90% of total costs, and joint venture equity can fund most of the developer's remaining contribution. We arrange development facilities from £5m to £350m.

What is the difference between LTGDV and LTC?

Loan to GDV compares the loan with the value of the finished scheme. Loan to cost compares it with the total cost of land and build. Lenders apply both tests, and the facility is set by whichever is lower.

Do you work with first-time developers?

Yes, on the right scheme. First-time developers usually need a strong professional team, an experienced contractor on a fixed-price contract and more equity, but there are lenders who back them.

Can you fund the land before planning?

Yes. We arrange bridging for land with or without planning, from 0.69% a month and up to 100% loan to value with additional security, refinanced into the development facility once consent is granted.

What is development exit finance?

A short-term loan that repays the development facility at practical completion, usually at a lower rate, giving you time to sell or let the remaining units without discounting them.

How are drawdowns released?

Monthly, against work certified by the lender's monitoring surveyor. The first advance usually covers part of the land, and later drawdowns follow the build programme and cost plan.

Do you arrange build to rent, student and commercial schemes?

Yes. Larger build to rent, purpose-built student, later living, logistics and mixed-use schemes are a core part of the £5m to £350m range, often with forward funding or an investment refinance as the exit.

How long does it take?

Indicative terms usually within one to two weeks of receiving the appraisal. First drawdown typically six to ten weeks later, once valuation, the monitoring surveyor's report and legal work are complete.

Related industries

Fund your next scheme properly

Send us the appraisal and we will come back with the structure and indicative terms, usually within a week.

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