UK Development Finance
Development Finance for UK property developers covers everything from single-unit conversions and small residential developments through to large-scale multi-unit schemes. For smaller builders in particular, access to the right funding can make the difference between a viable project and a scheme that never gets off the ground.
Development finance is not simply about securing the cheapest loan. Lenders assess the site, planning position, acquisition cost, build costs, projected gross development value, developer experience, cash contribution and proposed exit strategy. The structure of the funding can also be critical, with different lenders offering different approaches to land acquisition, development costs, interest, professional fees and contingency.
We arrange development finance for a wide range of UK projects, including new-build housing, conversions, refurbishment, permitted development schemes, mixed-use developments and larger residential developments. Funding can be structured for experienced developers as well as smaller builders with a strong project but a more limited development track record, subject to lender criteria.
The right funding structure may involve senior development finance alongside mezzanine finance, equity or other forms of capital where appropriate. Working with a broker who understands the whole capital stack can therefore provide access to a much wider range of funding solutions than approaching individual lenders directly.
From a single conversion through to a substantial residential development, the key is matching the project, developer and exit strategy with the right lender and funding structure from the outset.
What Development Finance Actually Is
Development finance is short-term funding for construction, conversion, or substantial refurbishment projects, structured entirely differently from a standard mortgage. Rather than a single lump sum, funds are released in stages as your build progresses, with interest commonly rolled up and repaid on completion rather than serviced monthly throughout the term.
Loan to Cost vs Loan to GDV: The Two Numbers That Actually Matter
It’s worth understanding these are genuinely two separate calculations, not interchangeable figures. Loan to Cost (LTC) measures your borrowing against the total cost of the project – land, build costs, and professional fees combined – commonly available up to 75-90% depending on the lender and your track record. Loan to Gross Development Value (LTGDV) measures your borrowing against the estimated value of the completed scheme, typically capped around 65-70% for senior debt alone, with an absolute maximum of around 75% for the very strongest cases. Most lenders apply whichever of these two tests produces the lower, more conservative figure, so it’s worth calculating both before assuming your maximum borrowing.
The Capital Stack: Foundation Layers
Our Senior Debt page covers the first-charge foundation of most development projects, our Stretched Senior Debt page covers a single facility combining senior and mezzanine into one loan, and our Mezzanine Finance page covers top-up funding layered above your senior loan when your own equity doesn’t stretch far enough alone.
Why Combining Layers Can Push Total Borrowing to 90%+ of Costs
Senior debt alone rarely covers your full project cost, which is exactly why mezzanine finance exists – layering a second facility on top can push your combined borrowing to 90% or more of total costs, reducing how much of your own capital needs to be tied up in any single scheme. It’s worth understanding this comes at a genuinely higher blended cost of capital, worth weighing against the benefit of spreading your own equity across multiple projects rather than concentrating it in one.
Stretched Senior: Why It’s Genuinely Grown as a Category in 2026
A single stretched senior facility, lending to 70-75% of GDV or 85-90% of total cost, has re-emerged as a significant product class this year after a period of contraction, offering a simpler alternative to layering separate senior and mezzanine facilities together. It’s worth comparing both structures properly with your broker, since the right choice genuinely depends on your specific project’s numbers and your appetite for managing two separate lending relationships versus one.
How Staged Drawdown Actually Works
Rather than receiving your full facility upfront, funds are released in tranches as your build reaches agreed milestones – typically following an initial advance to complete the purchase, then further releases tied to foundations, superstructure, and finishing stages. An independent monitoring surveyor, appointed by the lender but generally paid for by you, verifies progress against these milestones before each drawdown is authorised, giving the lender genuine confidence funds are being spent as intended.
Why This Genuinely Affects Your Cash Flow Planning
It’s worth planning your own working capital carefully around this staged structure, since you’ll typically need to fund the very early stages of a build – site setup, initial groundworks – before your first meaningful drawdown arrives, rather than assuming funds are available the moment contracts complete.
Why a Contingency Budget Is Genuinely Expected, Not Optional
Lenders generally expect a contingency allowance of 5-10% of total project cost built into your appraisal from the outset, and experienced developers build this in as standard rather than treating it as an afterthought. It’s worth understanding an appraisal submitted without genuine contingency is often viewed as a warning sign rather than simply an optimistic figure.
Multi-Unit Schemes: Why the Debt Genuinely Reduces as You Sell
On a scheme producing several units, it’s worth knowing your outstanding facility typically reduces progressively as each unit sells, rather than the full loan remaining outstanding until every unit has gone. This staged repayment structure is worth understanding clearly when modelling your own cash flow toward the end of a project.
Specific Project Types
Our Commercial Development Finance page covers funding for commercial and mixed-use schemes, our Permitted Development Finance page covers converting existing commercial buildings into residential use under current planning rules, our Structured Property Finance page covers genuinely bespoke, complex funding structures, and our Land Finance page covers acquiring land ahead of a development itself, whether with or without planning permission in place.
Why Planning Status Genuinely Shapes Your Available Lenders
A site with full detailed planning permission already granted will access considerably more lenders, and generally better pricing, than one with only outline permission or none at all. Planning permission isn’t always a strict requirement to secure finance at all, though having it in place will genuinely improve the terms you’re offered considerably.
Improvement and Exit
Our Refurbishment Loans page covers funding renovation and improvement works on an existing property, and our Development Exit Finance page covers refinancing a completed or near-complete scheme onto genuinely cheaper terms once construction risk has fallen away.
Why Your Exit Strategy Needs Deciding Before You Apply, Not After
Lenders will want genuine clarity on how you intend to repay the facility – selling the completed units, refinancing onto a term investment or buy-to-let product, or a combination of both across a larger scheme. It’s worth having this mapped out realistically from the outset, since a vague or unsubstantiated exit strategy is one of the more common reasons a development finance application stalls at underwriting.
Exit Fees: A Genuine Cost Worth Checking Upfront
Most, though not all, lenders charge an exit fee when you repay the facility, commonly 1-2% of either the loan amount or the GDV. It’s worth checking specifically which figure your own facility’s exit fee is calculated against, since the difference between a charge on loan amount versus GDV can be genuinely significant on a larger scheme.
Starting Out
Our First Time Developers page covers what genuinely makes a first scheme fundable, worth reading given how much the SME developer sector has shrunk – lenders are consequently more selective, but a straightforward first project with the right team behind it remains genuinely achievable. You don’t necessarily need prior development experience to apply, though a strong professional team behind you meaningfully improves both your chances and the terms you’re offered.
Why the Market Genuinely Favours Well-Prepared Developers Right Now
The UK development finance market enters the second half of 2026 with cautious optimism, following the volatility of 2022-2024. Lender appetite has genuinely sharpened since the second half of 2025, with over 200 active lenders now spanning high street banks, challenger banks, specialist non-bank lenders, and private credit funds. Development finance rates currently sit between roughly 0.65% and 1.10% per month – around 8% to 13% annualised – with the most competitive terms reserved for well-structured schemes below 65-70% loan-to-GDV, a proven track record, and a strong location. Larger loans above £1,000,000 for experienced developers can see rates as low as 6.5-7%, while smaller or higher-risk facilities typically run 10-16% annualised.
Fixed-Rate Development Finance: A Genuinely New Option in 2026
It’s worth knowing that where almost all development finance was historically variable-rate, several lenders now offer genuinely fixed-rate facilities, letting you lock in your cost of borrowing for the full build period rather than remaining exposed to rate movement throughout. This typically carries a modest premium of around 0.25-0.50% over an equivalent variable product, worth weighing against the genuine appraisal certainty a fixed rate provides over your build programme.
Why Your Project Team Genuinely Affects Your Rate
Beyond the numbers themselves, lenders assess the genuine strength of your project team – architect, contractor, and quantity surveyor – since a well-assembled team meaningfully reduces the risk of delays or cost overruns that could otherwise threaten the lender’s security. It’s worth presenting this team clearly and credibly as part of your application, not simply the numbers alone.
Why GDV, Not Current Value, Drives Everything
Unlike a standard mortgage, assessed against a property’s current value, development finance is assessed against Gross Development Value – the estimated open market value of your completed scheme. If your GDV looks optimistic against genuine comparable evidence, it’s worth addressing this openly in your own submission rather than waiting for a lender’s underwriter to raise it and delay your application.
Understanding the Full Cost, Not Just the Headline Rate
Beyond the interest rate itself, it’s worth budgeting realistically for the wider cost of a facility. Monitoring surveyor fees commonly run £750-£1,500 per site visit, with most lenders requiring an inspection at every drawdown stage. Valuation fees vary by scheme size – a project with a £3,000,000 GDV typically sees valuation costs of £3,500-£5,000 depending on complexity. Broker fees, where charged, are worth clarifying upfront, alongside the exit fee already covered above.
The Genuine Application Process, Step by Step
Most applications follow a similar pattern. You provide headline project details – site address, planning status, proposed scheme, GDV, total costs, and requested loan amount – and receive indicative, non-binding terms, typically within 24 to 48 hours for straightforward cases. Once you accept these, the lender requires a full application pack: a detailed development appraisal, full planning documentation, a schedule of works, a cost breakdown signed off by a quantity surveyor, your track record as a developer, a statement of assets and liabilities, and evidence of your own equity contribution.
Documentation You’ll Genuinely Need
A typical development finance application requires detailed build cost breakdowns, planning permission documentation or evidence of progress toward it, an appraisal showing your projected GDV and profit margin, your project team’s credentials, and evidence of your own available capital or equity contribution. It’s worth having this genuinely well-organised from the outset, since incomplete information is one of the most common causes of delay at the underwriting stage.
Not Sure Which Category Applies to You?
If you’re weighing up how the different layers of the capital stack genuinely fit together for your specific project, our Development Finance Explained guide covers the full journey from senior debt through to mezzanine and stretched senior structures in one place.
Frequently Asked Questions
What’s the difference between Loan to Cost and Loan to GDV?
Loan to Cost measures borrowing against your total project cost; Loan to GDV measures it against your completed scheme’s estimated value – lenders typically apply whichever produces the lower figure.
How is development finance actually released?
In staged tranches tied to build progress, verified by an independent monitoring surveyor before each drawdown, rather than as a single upfront advance.
Do I need full planning permission to get development finance?
Not always, though sites with full detailed permission access considerably more lenders and better pricing than land with only outline permission or none at all.
What rate can I expect on a development finance facility?
Commonly around 8-13% annualised (0.65-1.10% per month) depending on experience, loan-to-GDV, and scheme complexity, with the strongest larger loans sometimes as low as 6.5-7%.
Can I combine senior debt and mezzanine finance on the same project?
Yes – this is a genuinely common structure, capable of pushing combined borrowing to 90% or more of total project costs, alongside the increasingly popular single stretched senior alternative.
Will I pay an exit fee when I repay my development finance?
Most lenders charge one, commonly 1-2% of the loan amount or GDV – worth confirming which figure applies to your specific facility.
Get in touch with details of your development, and we’ll help you structure the right facility.
