If you want to finance a commercial or residential building project, property development finance can help you start without having to cover the entire cost upfront. Here, we’ll explain what property development finance is, how it works, the eligibility criteria, how rates differ, and where to get expert support.
What is property development finance?
It’s a specialist type of commercial finance designed to fund construction, refurbishment, or property conversion projects.
Unlike a standard commercial mortgage, development finance is typically released in stages throughout the build process rather than as a single lump sum.
UK property development finance can be used for projects such as:
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Residential housing developments
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Commercial property developments
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Mixed-use or semi-commercial projects
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Property conversions and refurbishments
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Student accommodation or apartments
How does it work?
A typical development finance arrangement usually works like this:
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Initial application: The lender assesses the project, costs, planning permission, and developer experience.
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Site purchase funding: An initial percentage of the land or property purchase price is released.
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Build stage drawdowns: Additional funds get released at pre-agreed construction milestones.
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Monitoring: Surveyors will inspect progress before further funds are paid.
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Project completion: The development is sold, refinanced, or retained as an investment property.
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Loan repayment: The finance is repaid through the sale or refinance of the completed development (exit strategy).
Property development finance is usually structured as a short-term lending facility, with terms often ranging from 6 to 24 months. It’s designed to cover both the purchase of a site and the construction costs involved in the project.
Rather than releasing all funds upfront, lenders typically advance the money in stages as the development progresses. Similar to a self-build mortgage, these staged payments are often referred to as “drawdowns”.
Interest is often rolled up into the loan, meaning repayments may not be required monthly during your construction phase.
Eligibility criteria for development finance
If you’re trying to secure finance for property development, some of the main areas lenders will assess include:
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Developer experience: Experienced developers with a proven track record can sometimes borrow more money at better rates or with improved terms.
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First-time developers: Small property development finance may be available, although lenders may require additional security, larger deposits, or experienced contractors involved in the build.
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Planning permission: Full planning permission is preferred by most lenders, although some may consider outline consent or permitted development (PD) projects.
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Project profitability: Lenders will carefully review the projected gross development value (GDV) and your expected profit margins.
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Deposit: Most lenders require the developer to contribute a portion of the project costs. However, there can sometimes be ways to arrange 100% financing.
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Exit strategy: Evidence of a clear repayment vehicle is essential for repaying the loan, whether it’s the eventual sale of the property, refinancing, or long-term investment retention.
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Build costs and timelines: Providing detailed construction budgets and realistic schedules helps reassure lenders that the project is achievable and reduces their perceived risk.
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Credit profile: Your personal and business credit history may still play a role, particularly for smaller developers or first-time applicants.
How to get property development finance
Finding the right property development finance solution can be complex, particularly because lenders have differing criteria they’re willing to accept. Approaching the wrong lender can slow the process down or reduce your chances of approval.
Speaking with a specialist development finance broker can make it much easier to secure funding. An experienced broker can compare lenders across the market, identify options suited to your project, and help structure your application properly to improve your chances of securing competitive rates and attractive terms.
If you’d like a free, no obligation chat with a specialist broker who can help you compare your property development finance options and find the most suitable lender for your project, you can get started below.
Speak to a development finance specialist today
UK property finance development lenders
While your specific development plans will ultimately determine which lenders are suitable, here are some examples of a few mainstream and specialist UK lenders that may consider property development finance:
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Royal Bank of Scotland (RBS): Could provide funding of £50,000 or more for residential property development with terms of up to 3 years.
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Oak North: Typically considers loans up to 55% of the GDV for property development finance. The minimum loan is £1 million, and the term can be up to 36 months.
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Paragon Bank: Development finance from Paragon can be used for a diverse range of projects, including care homes, light industrial schemes, pre-let commercial properties, and residential developments.
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NatWest: Open to property development finance for residential developers with a minimum borrowing amount of £50,000 for a term of up to 3 years. The finance must be on a variable interest rate, but you can repay your loan with no early redemption charges.
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Shawbrook Bank: Considers development finance applications for loans between £1 million and £30 million, with up to 85% loan-to-cost. Shawbrook also offers funding of up to 65% GDV for new build projects and up to 70% GDV for refurbishment developments.
Alternative types of commercial finance
Although development finance can be the most suitable solution for construction or refurbishment projects, there are alternative forms of commercial finance that may be worth considering, depending on your circumstances:
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Type of finance |
Best for |
Typical use |
Speed of access |
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Long-term property ownership |
Purchasing commercial premises |
Moderate (weeks) |
|
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Short-term property purchases |
Time-sensitive transactions |
Fast (days) |
|
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Purchasing property at an auction |
Completing within strict auction deadlines |
Very fast (days) |
|
|
Refurbishment finance |
Renovations |
Property upgrades and conversions |
Moderate (week or longer) |
|
General funding |
Supporting wider development costs |
Fast (days) |
Property development finance rates
Rates can vary significantly depending on the lender, the project risk, and the developer’s experience. These key areas typically influence development finance rates:
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Loan-to-cost (LTC)
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Loan-to-gross development value (GDV)
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Developer track record
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Planning status
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Project complexity
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Exit strategy
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Type of property
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Wider market conditions
Property development finance rates can fluctuate regularly, so if you’d like to get an idea about today’s current rates, the best strategy is to get an advisor to carry out a rate comparison based on some of your basic project details.
Speak to a specialist property development finance broker
If you’re exploring property development finance and want tailored guidance or help comparing lenders and rates, our specialist brokers can help arrange a bespoke funding solution for your project.
Here are some of the reasons developers and property investors choose to work with Money Helpdesk:
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Speak with experienced development finance specialists
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Access to bespoke financing from mainstream and specialist lenders
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Tailored support for first-time and experienced developers
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Free initial discussion with no obligation to proceed further
If you’d like to speak to an advisor about arranging property development finance for a free, no-obligation chat, you can get started here.
FAQs
It depends on the size of the project, your experience, available deposit, and exit strategy. For many developers, specialist property development finance offers the most flexible solution because funding is released in stages throughout the build process.