Borrower Tips
If you’re building from the ground up or taking on a major refurbishment project, chances are you’ll need development finance to fund it. This type of specialist property loan is designed for developers looking to purchase land or sites and construct residential, commercial or mixed-use buildings.
Unlike a traditional mortgage, which can last decades, development finance is a short-term solution (usually repaid within 9 to 36 months) and tailored around the construction timeline and sales strategy.
In this guide, we’ll cut through the complexity to give you a clear understanding of:
We’ll also show you how Brickflow’s digital platform makes it faster and easier to secure funding, giving you instant access to 100+ lenders and saving hours of time compared to the traditional, manual approach.
Property development comes with countless moving parts, from planning permissions and construction timelines to market fluctuations and material costs. But one of the more predictable elements is how development projects are financed.
Development finance is a short-term loan designed to fund the construction, conversion, or heavy refurbishment of residential, commercial or mixed-use property schemes. These loans are typically repaid through the sale of the completed development or by refinancing onto a long-term investment mortgage.
At Brickflow, our data from Q1 2025 shows the smallest development loan offered was £25,000, and the largest was £150 million, illustrating how flexible and wide-ranging this funding can be.
To fully grasp development finance, it’s important to understand the capital stack — the layers of funding that make up a project’s financial structure. These typically include:
Senior Debt: The main loan, often provided by a bank or specialist lender. This is usually the largest portion of the capital stack and secured against the property.
Equity: The developer’s own cash or investment, used to cover the deposit and sometimes initial costs.
Mezzanine Finance (optional): A second layer of funding that sits between senior debt and equity, often used to reduce the amount of equity the developer needs to contribute.
Each layer comes with different levels of risk, cost, and repayment priority, and choosing the right structure can significantly impact your project’s success.
| Priority | Debt Layer | Description |
|---|---|---|
| 04 | Equity | Cash, normally attracts an interest rate or coupon + a profit share, e.g. 10% interest rate & 40% profit share |
| 03 | Mezzanine | Bridges the gap between senior debt and equity. Higher risk and return, with rates from 12%–20% p.a., often including an exit fee. |
| 02 | Stretched Senior | A hybrid of senior and mezzanine debt, offering higher LTC or LTGDV. Rates typically range from 8%–12% p.a. |
| 01 | Senior Debt | The main loan secured against the project, usually covering |
Debts are repaid from the bottom up. The capital stack is a key feature of any development funding so lenders can see where they fit into the hierarchy to assess their level of risk.
Development finance is designed to support property projects from acquisition through to completion, with funds released in stages as the build progresses. While every scheme is different, the process tends to follow a consistent path:
The developer identifies a viable site. If the developer already owns the land and planning permission is in place, they can typically secure a development finance loan straight away. If the land needs to be purchased or additional time is required for planning, a developer could secure a short-term bridging loan in the first instance before refinancing onto a development facility.
Once the developer has determined if a development finance loan is suitable, a funding proposal is submitted, including key details such as:
Off the back of preliminary information provided, indicative terms can be provided. This is the estimated amount a lender is willing to offer, based on project costs, GDV, and your equity. Not a formal offer, but a strong funding indication.
Interest rate and fees
If the developer is satisfied with the indicative terms, they will typically provide more detailed information. The lender’s underwriter evaluates the project’s viability, the developer’s experience, and the proposed exit plan.
As part of the Lender’s due diligence, they will also seek out an independent valuer and quantity surveyor (QS) to assess the land or building’s current value and the estimated build costs to verify assumptions.
The lender’s solicitors carry out checks on:
Once the solicitor has undertaken these checks, final documentation is prepared including the loan agreement which states the terms of the transaction. These terms may have changed from the indicative offer provided at the start of the transaction if something has materially altered in the deal.
Once legals are completed and documents are signed, the loan formally completes. The first tranche of the loan is released (often to fund the land purchase) and further drawdowns are made in stages, aligned with build progress and certified by the QS. Drawdowns typically fund works in arrears to ensure that the loan is being used appropriately on site.
The loan is repaid at the end of the project, either by selling the completed units or refinancing onto a long-term investment loan.
LTGDV refers to the loan as a percentage of the estimated end value of the project, while LTC refers to the loan as a percentage of the total costs (land, construction, professional fees, etc.).
While each lender has their own criteria, development finance products share many common features. Understanding these helps developers compare offers more effectively and plan for the lifecycle of their projects.
Development finance is short-term, typically lasting 12–36 months, with the average loan running between 18–24 months. The term is designed to match the build and exit timeline, whether that's through sale or refinance.
Interest is usually charged on a monthly rolled-up basis, meaning it's added to the loan rather than paid monthly. Rates generally fall between 6–12% per annum, averaging 10.93% in Q1 2025, depending on factors such as:
Lenders will typically charge:
Here’s a quick summary:
| Feature | Typical Rage (2024 - 2025) | Notes |
|---|---|---|
| Loan Term | 12–36 months | Short-term, usually tailored to the build period |
| Interest Rate | 6–12% p.a. (rolled-up monthly) | Depends on risk profile, LTC, and borrower track record |
| Arrangement Fee | 1–2% of loan amount | Charged at the start of the facility |
| Exit Fee | 0–1% (sometimes higher or waived) | Charged on repayment, linked to GDV or loan amount |
Property development finance is a versatile funding solution that supports a wide range of project types. Some of the most common uses include:
Funding new-build projects such as residential homes, apartment blocks, or commercial buildings from scratch. This involves purchasing land or a site and constructing entirely new structures.
Financing the transformation of existing buildings, for example converting office spaces into residential flats using permitted development (PD) rights. These projects often benefit from faster planning processes.
Providing capital for major renovations or heavy refurbishments of existing properties. This can include updating interiors, improving structural elements, or modernising facilities to increase value and appeal.
Supporting schemes that combine different property types within one project, such as retail units on the ground floor with residential apartments above. These developments offer diversified income streams and appeal to a broader market.
Developers can access finance from a variety of sources depending on their project stage, risk appetite, and funding needs. Here are the main options:
The primary source of funding for most property developments. Provided by specialist lenders, these loans cover construction costs and are typically short-term, structured around the project timeline.
Used mainly for short-term funding needs, such as purchasing land or property pre-planning, or to speed up completions. Bridging loans are faster to arrange but usually come with higher rates and fees.
A form of debt that sits between senior development loans and equity. Mezzanine finance provides additional leverage and fills funding gaps but often at higher cost and risk. It’s commonly used to increase loan-to-cost ratios.
Developers can bring in equity investors or form JV partnerships to top up their own capital contribution. This reduces loan size and risk for lenders, but means sharing project profits.
Lenders assess several key criteria before approving development finance:
Developer vs. Homeowner
| Developer | Homeowner |
|---|---|
| Build and sell for profit | Renovate or self-build for own use |
| Focus on return on capital employed (ROCE) | Focus on long-term residency |
| Require short-term, flexible loans | Usually use longer-term mortgages |
| Need higher loan-to-cost ratios | Typically lower-risk financing |
| Detailed due diligence and commercial loan structures | 0–1% (sometimes higher or waived) |
H2: How to get finance for property development using a specialist mortgage broker
Many developers initially approach high-street banks, attracted by their lower headline interest rates. However, a slightly higher interest rate from specialist lenders is often outweighed by the benefits of lower deposit requirements, which can free up hundreds of thousands of pounds in capital. This, in turn, boosts your return on capital employed (ROCE), a critical metric for successful developers.
A skilled property development finance broker understands these nuances and can connect you with alternative lenders who typically offer higher leverage and more flexible funding options than traditional banks.
| Developer | Homeowner | Typical Requirements by Lender Type |
|---|---|---|
| Planning Permission | Most lenders require full planning permission before releasing funds or completing the loan. | Non-Bank lenders may consider pre-planning at higher cost; others typically require full consent. |
| Developer Experience | Lenders prefer a proven track record to reduce risk. | High Street: 2–3+ completed schemes; Challenger: at least 1 project; Non-Bank: more flexible if strong exit. |
| Creditworthiness | Clean credit history and sound financials show reliability and repayment capability. | High Street & Challenger lenders need solid credit; Non-Bank lenders may be more lenient but charge higher rates. |
| Exit Strategy | A clear plan for repaying the loan, such as selling the completed project or refinancing. | Required by all lenders; must be viable and supported by evidence (e.g. GDV appraisals, refinance terms). |
| Security | Most lenders require personal guarantees and may also secure the loan against other assets. | Non-Bank lenders often ask for stronger security; High Street may waive PGs for established borrowers. |
| Company Structure | Loans are usually offered to Special Purpose Vehicles (SPVs), reducing exposure to unrelated business risks. | SPVs preferred across all lender types, especially for development and bridging loans. |
Brickflow combines expert broker knowledge with powerful digital tools to make sourcing finance smarter and faster.
At Brickflow, we’re reshaping how property development finance is done. What used to take weeks (like getting a decision in principle) can now take under an hour. Our platform empowers the UK’s top commercial brokers and property professionals to compare, structure, and submit development finance applications with unprecedented speed and confidence.
Brickflow connects borrowers to over 100 lenders, combining expert advice with powerful technology to deliver faster, smarter funding decisions. Whether you're building to sell or hold, our digital-first platform helps you access the most competitive finance on the market, tailored to your project and timeline.
Explore live development finance deals, check your eligibility, and start structuring your next project in minutes with Brickflow.
Property development finance is essential for bringing projects to life, but choosing the right funding is key. With Brickflow, developers and brokers can compare loans from the UK’s largest panel of lenders, making it faster and easier to secure the best deal and move projects forward with confidence.
In this article, we covered:
Ready to find funding for your next project? Start your search with Brickflow today.
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