Development Finance

With an ever-growing demand for property in the UK, on both a residential and commercial basis, the need for property developers – big and small – is high.

What is property development finance?

Development finance is a product used to fund ground-up developments, conversions and refurbishments on all scales. The appetite for lending to both seasoned and first-time developers is still there, even after a rocky two years during the COVID-19 pandemic.

Finance is available from £25,000 up to and beyond £25 million, for larger deals.

On any scale, development finance can become complicated, especially when trying to navigate the market on your own to find the best rates and terms.

Is development finance short term?

In the same way that bridging finance, development finance is also a short-term lending solution. Funds can be borrowed from under a week, for minor refurbishments, to 36 months for larger, ground-up or conversion development deals.

The wide range of lenders available to borrowers, allows for many different types of deals to be arranged with varying terms and rates.

How does development finance work?

The funds for the development are usually broken down into two sections, the first being the funds to purchase the site. This is usually advanced as a percentage of the purchase price and the remaining amount covered by yourself. The second segment is the funds to finance the building stage of the development. This part of the finance is usually advanced in stages of the build. Most lenders will certify each stage and release the funds as and when they are finished in order to pay the suppliers. Often you will need to have adequate cash flow to fund some of the stages until you are compensated.

Although, some lenders will advance the funds in one lump sum, this tends to be for refurbishments and some conversions.

Can I get development finance without experience?

There are lenders available to new and aspiring property developers who are looking to take on their first single or multi-unit project.

There are also lots of lenders available to seasoned developers who have multiple past projects in their portfolio and are looking to take on similar projects or even bigger ones.

For the new and smaller property developers, lenders will often offer less flexible and higher rate terms, usually because of the risk to the lender.

The more experienced developers are likely to get the higher funding from the larger lenders and will likely find the criteria is more flexible with the types of deals and terms they can arrange.

How to get development finance

Presenting your project to the lender in the best light is key to arranging the best deals. At Veracity, we understand what information lenders will want to know about your project. The main features include:

  • An overview of the applicant (assets & liabilities, past projects),
  • An overview of the project – what and why you are developing,
  • The gross development value,
  • Costs to complete the works,
  • The term required,
  • Whether other investors are involved
  • The exit strategy.

Having an appraisal of your project to ensure it is a viable plan will also show the lender that your project is a sound investment.

How do I repay development finance?

As with bridging finance, development finance is repaid on an interest-only basis, either serviced, retained or rolled-up.

  • Rolled-up interest – All the monthly interest is added to the capital outstanding and will all be paid when the loan is repaid.
  • Retained interest – The overall interest payments are deducted from the gross loan amount before the loan is advanced. Essentially all the interest is paid upfront.
  • Serviced interest – This works in the same way a ‘standard’, interest-only mortgage would, the interest is paid monthly.

The capital outstanding will be repaid at the end of the term, which is why having an exit strategy in place is important. There are many different ways to exit, such as selling the security upon completing the development, refinancing onto a ‘standard’ mortgage with a high-street lender, using development exit finance or repaying the finance with the sale of other assets or investments.

Why choose Veracity?

Here at Veracity, we can secure finance for most projects, including commercial mortgagessemi-commercial mortgagesregulated and unregulated bridging loanshigh-value residential mortgages and buy to let mortgages. We have an unrestricted network of over 500 high-street, specialist and private lenders who can offer our clients the best deals on the market.

We will negotiate terms and rates for your finance needs, in some cases, lenders will offer us bespoke deals depending on the type of deal and the individual’s circumstances. Our advisers will work with you to find the most appropriate deals and explain to you any potential risks involved as well as the benefits.

Your adviser will work on your behalf to submit any necessary paperwork needed to apply for the chosen deal and ensure any of your questions are answered in a timely manner.

To read our full Corporate Fee Structure click here.

If you have a Development project that you wish to discuss, then contact us.


Picture of Woody Snapper

Woody Snapper

Woody works with individuals and business' looking for corporate finance, high net worth mortgages, complex loans, bridging loans and development finance.

To contact Woody.

Tel: 07922 413586