Development · Senior debt

Senior development debt

The foundation of most capital stacks: a first-charge facility that funds the land and the majority of build costs, at the lowest cost of capital available.

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How senior debt works

Senior debt sits first in line for repayment and takes a first legal charge over the site. Because it carries the least risk in the capital stack, it is also the cheapest money. Lenders range from high-street banks and challenger banks to specialist development lenders and debt funds.

A typical senior facility funds part of the land cost on day one and up to all of the build costs in monthly drawdowns. The developer’s equity — usually through the land — goes in first. Interest and fees are generally rolled into the loan and repaid at the end.

When senior debt is the right fit

Schemes with full planning and a well-evidenced GDV
Developers with relevant experience and the equity for the remaining costs
Projects where keeping the cost of capital low matters more than maximum leverage

Questions

Frequently asked questions

Is a bank or a specialist lender better for senior debt?

Banks can be cheaper but tend to be more conservative on leverage, experience and pre-sales. Specialist lenders and debt funds are often more flexible and quicker, at a higher cost. The right choice depends on your scheme and priorities.

Do lenders require pre-sales?

Some banks do, particularly on larger schemes. Most specialist development lenders do not require pre-sales but will assess market depth and sales evidence carefully.

Can the land be counted as my equity?

If you already own the site, lenders will usually credit some or all of its current value as your contribution. Where land value has increased since purchase — often because planning has been granted — the increase may count, subject to the lender’s policy.

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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