Development Finance to Power Builds & Conversions

Development finance is a short- to medium-term loan for purchasing land/defunct buildings and covering build costs. Funds are released in stages as the project progresses, verified by a monitoring surveyor or asset manager, and interest can be rolled up or retained from the full facility. The loan is repaid in full when the development is sold or refinanced onto a longer-term product.

Development finance is perfect for ground-up construction, major conversions, multi-unit projects, or finish-and-sell strategies. It provides structured funding aligned with construction milestones.

Lenders assess leverage in three ways:

• LTV (Loan-to-Value): day-one leverage on the site—often up to 50–65%.

• LTC (Loan-to-Cost): proportion of total costs covered—commonly up to 80–90% of costs.

• LTGDV (or % of GDV): loan as a share of the Gross Development Value—often up to 65-75% GDV.
  Exact levels depend on experience, asset, location and exit.

When each stage is completed, funds are released in tranches as the lender’s Monitoring Surveyor (MS) or asset manager verifies each stage of work. You submit a cost-to-complete report along with an updated project programme, and the lender then releases the next drawdown to your solicitor or project account.

Yes. Some lenders offer rolled-up interest (paid at exit) or retained interest (pre-funded into the facility). Interest roll-up should be a cheaper solution as you only pay for what you draw and if you complete the scheme ahead of schedule, you’ll save interest vs a retained interest option.

• Senior debt: the primary first-charge loan funding most costs.

• Mezzanine finance: a second-charge layer that tops up leverage (usually more expensive).

• Stretch-senior: a single senior facility offering higher leverage than standard senior, sometimes reducing the need for mezzanine.
  These structures can help reduce your equity input while keeping ownership intact.

Timeframes vary by complexity, but for straightforward schemes expect:

• Indicative terms in 48-72 hours (if all documentation necessary is provided in full)
• Valuation, MS and legal instruction in 2-4 weeks (but there are many variables that could make this process longer i.e. access arrangements, lender site meeting etc)
• First drawdown soon after all property and construction conditions are satisfied

Comprehensive, accurate and transparent documentation, responsive/proactive solicitors and site access are the biggest speed levers that your professional team can influence.

Pricing reflects risk, leverage and experience. Typical costs include:

• Interest (rolled or retained), often with a minimum interest period
• Arrangement fee (typically 1–2%) and in most cases an exit fee of 1%

• Professional fees: RICS valuation, MS monitoring fee, legal due diligence, and title insurance(where applicable)

Maximum leverage, complex sites or limited track record generally mean higher rates/fees.

Usually, a first legal charge over the site (normally owned in a SPV), plus debenture and director’s PG (full or limited). Additional security - such as second charge over other assets - can improve leverage or pricing.

Ideally, have these available to speed lender approval:

• Project appraisal (comprehensive costing to include CIL/S106 payments, professional fees, contingency - typically 10%, plus an allowance for sales/marketing costs etc. In addition, an overview of timelines and GDV.
• Drawings & planning (consents, conditions, statutory obligations)
• Details of proposed professional team and contractual obligations (details of all professionals involved i.e. third-party builder, structural engineer, architect and Q/S where applicable. Details of their PI cover and those providing warranties or entering into formal contracts i.e. Design & Build, Turnkey, JCT or whether self-procured. Developer CV demonstrating similar schemes completed).
• Borrower pack (SPV details, ID/AML, assets & liabilities for all directors/shareholders)
• Exit evidence (minimum of a sales schedule). An agent letter or investment AIP - if exit via refinance)
• Recent RICS valuation and MS report (if available)