What is Development Finance?
Development finance is a specialised, short-term funding solution designed to cover the significant costs associated with property construction and renovation. Typically structured for 6 to 24 months, these loans are essential for ground-up developments and heavy refurbishments where traditional mortgages fall short. Unlike standard commercial loans, development finance covers both the site acquisition and the build phase, with funds released in stages following certified inspections by a quantity surveyor. This ensures liquidity is maintained throughout the project, allowing developers to focus on delivery while exit strategies, such as sale or refinancing, are finalised.
Eligibility & Key Requirements
Securing development finance requires a robust project presentation. Lenders look for experienced developers with viable projects and clear exit strategies to minimise risk and ensure project success.
Proven track record of successful property developments.
Full planning permission granted for the proposed project.
Comprehensive development appraisal and cost breakdown.
Detailed project timeline including build and sale stages.
Clear exit strategy via property sale or long-term refinance.
Detailed professional CVs of the project development team.
Frequently Asked Questions
How is development finance released?
Funding is typically released in stages based on the project's physical progress. This follows an initial loan for the site purchase, ensuring capital is deployed efficiently as construction reaches key milestones.
How do exit strategies work?
The loan is typically repaid upon the sale of the developed units or by refinancing onto a conventional commercial mortgage. A clear and viable exit strategy is critical for a successful application.
What security is generally required?
Most lenders require a first legal charge over the property or site being developed. Additionally, personal guarantees or second charges on other assets may be requested depending on the loan-to-value ratio and borrower profile.
How are interest rates calculated?
Rates vary based on the project's risk profile, the developer's experience, and the loan-to-cost (LTC) or loan-to-value (LTV) ratios. We work to secure competitive, tailored rates through our specialist network.