Senior Debt
Senior debt is the foundation most UK development projects are built on – the primary, first-charge borrowing that funds the bulk of a scheme, and typically the lowest-cost form of development finance available.
What Senior Debt Actually Is
Senior debt is development finance secured by a first legal charge over the development site, meaning the lender providing it has priority over any other lender if the borrower defaults and the property needs to be sold. This priority position is exactly why senior debt is the lowest-cost form of development borrowing – the lender is taking on the least risk, and prices accordingly.
How Much Senior Debt Typically Covers
Most senior lenders cap lending at 60-65% of Gross Development Value, the projected value of the completed scheme, though some specialist lenders will stretch to 70% for particularly strong, experienced borrowers. Assessed against total project costs rather than end value, senior debt can fund a higher proportion, often up to 80-90% of costs, depending on the lender and the strength of your application.
Worked Example
On a development with a Gross Development Value of £6 million, a lender capping at 65% LTGDV would offer a maximum senior facility of £3.9 million. On a smaller scheme with a £1 million GDV and £300,000 of estimated construction costs, a 65% cap gives a maximum facility of £650,000 – covering the construction costs in full, with the remainder available toward the purchase.
Rates and Terms
Senior debt rates typically range from 6.5% to 10% per annum, depending on your experience as a developer, the scheme’s risk profile, and the specific lender. Terms are structured around your build programme, with funds released in stages as construction progresses, verified against evidenced completion at each drawdown.
What Senior Debt Can Be Used For
Senior debt is suitable at any stage of a development project, funding one or multiple schemes at genuinely any scale – new-build residential, commercial development, mixed-use schemes, and conversions all commonly draw on senior debt as the primary funding source.
When Senior Debt Alone Isn’t Enough
If your available equity doesn’t comfortably cover the gap between what senior debt provides and your total project costs, you have a few genuine options: contributing more of your own capital, bringing in an equity partner, adding a separate Mezzanine Finance facility on top, or considering a single higher-leverage facility instead. Our Stretched Senior Debt page covers this last option in detail – a way to access considerably more leverage without layering a separate mezzanine facility on top.
Why Experience and Track Record Matter
Senior lenders generally want to see a genuine track record of previously completed developments, particularly for larger or more complex schemes. First-time developers aren’t automatically excluded, but typically face more conservative loan-to-value terms and closer scrutiny of their proposed project team and contractors.
Refinancing and Exiting Senior Debt
Once your scheme reaches practical completion, our Development Exit Finance page covers switching onto genuinely cheaper terms while you sell or let the finished units, rather than continuing to pay development-level rates once the construction risk has largely gone.
Frequently Asked Questions
Why is it called “senior” debt?
Because the lender holds a first legal charge, giving them priority over any other lender if the borrower defaults and the property needs to be sold.
How much can I borrow through senior debt?
Typically up to 60-65% of Gross Development Value, though some lenders stretch to 70% for strong, experienced borrowers, with a higher proportion of total costs often achievable.
What happens if senior debt alone doesn’t cover my project costs?
You can contribute more equity, bring in an equity partner, add mezzanine finance on top, or consider a stretched senior facility offering higher leverage in a single loan.
Do I need previous development experience to get senior debt?
Not always, though lenders generally prefer a proven track record, particularly for larger schemes – first-time developers typically face more conservative terms.
What rates can I expect on senior debt?
Commonly 6.5-10% per annum, depending on your experience, the scheme’s risk profile, and the specific lender.
Get in touch with details of your development project, and we’ll help you find a senior lender genuinely suited to your scheme.
