Development finance is a short-term funding solution, typically available for 6 to 24 months, designed to support residential and commercial development projects. It helps cover both site acquisition costs and construction costs, making it an essential funding option for developers undertaking new builds, conversions, or refurbishments.
This type of property development finance can be used for projects of all sizes, from single-unit developments to large-scale, multi-phase schemes that may not qualify for standard mortgage funding.
A development loan is usually structured in two main stages, ensuring funds are released in line with project progress.
The first stage of funding assists with acquiring the development site. This may involve purchasing land for new builds or buying an existing property requiring refurbishment or conversion.
The second stage of development finance funding covers build and construction costs. Rather than releasing all funds upfront, lenders issue money in staged drawdowns as work is completed. These payments are typically made monthly and are based on progress reports and site inspections carried out by a surveyor.
This structured approach helps developers manage cash flow while ensuring the project remains on track.
When assessing an application for development finance, lenders focus on several critical factors:
Lenders evaluate the potential profitability of the development, taking into account local market demand, projected sale prices or rental values, and overall build costs.
While first-time developers can obtain development finance, applicants with a proven track record of successful projects are often viewed more favourably and may access more competitive terms.
A clear and realistic exit strategy is essential. Repayment may be achieved through the sale of completed units, refinancing onto a long-term mortgage, or a combination of both.
Most lenders base funding on a percentage of the project’s final value, known as Gross Development Value (GDV). Development finance is typically offered at up to 65–75% of GDV, depending on the lender and project risk.
Development finance is widely used by property developers, investors, and builders who require flexible, structured funding. It is ideal for those looking to acquire land, refurbish existing properties, or undertake complex construction projects that fall outside standard mortgage criteria.
By offering staged funding and tailored repayment structures, property development finance ensures capital is available when needed—helping developers maintain cash flow, manage risk, and successfully deliver projects to completion.