Development finance

Development finance, structured around your scheme

Funding for ground-up builds, conversions and large refurbishments — from straightforward senior debt to a full capital stack with mezzanine or equity partners.

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What development finance is

Development finance funds the purchase of a site (or refinances land you already own) and the build costs needed to complete a scheme. Unlike a bridge, it is drawn in stages: the land element is advanced at the start and build funds are released monthly in arrears as a monitoring surveyor confirms progress.

Lenders size the facility against two measures: loan-to-cost (the share of total costs they will fund) and loan-to-gross-development-value (the share of the completed value they are comfortable with). The lower of the two usually sets the limit. Where senior debt alone leaves too large an equity gap, a stretched senior facility, mezzanine finance or a joint venture partner can bridge it.

Interest is usually rolled up and repaid from sales or refinance at the end, along with an exit fee. We model the whole capital stack — including interest and fees — so the appraisal you take to lenders is the one that will survive scrutiny.

Typical schemes

Ground-up residential schemes, from small infill sites to larger multi-unit developments
Commercial-to-residential and office-to-residential conversions
Mixed-use developments with ground-floor commercial space
Build-to-rent and build-to-hold schemes with a refinance exit
Heavy refurbishments where the works are effectively a rebuild

What lenders will look at

Planning consent and any conditions or Section 106 / CIL obligations
A detailed build cost plan, ideally reviewed by a quantity surveyor
The contractor and form of building contract
Your team’s track record on schemes of similar size and type
Comparable evidence supporting the gross development value

The capital stack

Building the right capital stack

Most schemes are funded in layers. Senior debt is cheapest and is repaid first; mezzanine and equity cost more because they take more risk. The art is balancing leverage, cost and control for your scheme.

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Developer equityFirst loss

Mezzanine / JV equityOptional layer

Senior debtFirst charge

Illustrative only. Repayment priority runs from the bottom (senior debt) upwards.

Development finance options

Questions

Frequently asked questions

How much equity do I need for a development?

With senior debt alone, many developers put in roughly 10–25% of total costs, often through the land. Stretched senior and mezzanine reduce that requirement, and some joint venture structures fund nearly all of the costs in exchange for a share of profit. The right answer depends on your appraisal and appetite for sharing profit.

Do I need full planning permission?

For the build facility, yes — lenders generally require a full, implementable consent with the relevant pre-commencement conditions discharged. Before planning, a land bridge can fund the site.

Can I get development finance as a first-time developer?

It is possible, particularly on smaller schemes with an experienced contractor and professional team in place. Expect lower leverage and closer scrutiny. Partnering with an experienced developer or a joint venture funder is another route.

What happens if build costs rise during the project?

Your appraisal should carry a contingency, typically 5–10% of build costs. If overruns exceed that, the lender will normally expect you to fund the difference before further drawdowns. We look at contingency and cost risk carefully at the outset so the facility has realistic headroom.

Working up a scheme?

Share the appraisal as it stands — even in draft. We will look at the capital stack with you before anything goes to a lender.

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