Development finance isn’t straightforward.

Here are our most asked questions:

Questions our team regularly get asked. If you have any more questions that the below doesn’t answer, please get in touch.

How do property developers raise capital?

The cheapest way to raise capital for property development is to take out a development finance loan. This is because using someone else’s equity is nearly always more cost effective than using your own. Find out more in our Easy Guide to Development Finance.

Why do smaller development finance loans have higher rates of interest?
This isn’t always the case. Every lender has a different way of calculating development loans, which is why it’s so important to shop around for your funding. If you send the same project to 10 different lenders you will receive 10 different loan amounts and 10 different lots of interest rates and fees.
Why would banks offer lower interest rates for loans?
Like any financial product, development finance interest rates are dictated by risk (or implied risk). Risk and leverage are inextricably linked, so the lower the leverage the lower the risk for the lender, which may help secure a lower interest rate.

It’s not always the banks that offer the best interest rates, so Brickflow searches over 30 lenders, enabling you to compare in minutes.

What is a tranche in development finance?
In property development finance, a tranche is a portion of an agreed loan. Tranches are drawn down in stages throughout the development, and the total incorporates all pre-build and build costs. The number of tranches and how they are divided will be agreed between the borrower and the lender, and normally depend on the complexity of the project.

For example, Tranche 1 could be for site demolition, clearance and set-up, and Tranche 2 for ground clearance, drainage, basement excavation & construction, and so on.

What is a joint venture in property development?

A collaboration with another party who has skills or experience that you don’t, required to make a strong enough case to a lender to secure development finance. 

For example, if you’re an estate agent or planner, it’s likely you’ll be great at finding the best sites but might need to bring in a project manager with more practical skills.  With joint ventures, it’s essential to agree Personal Guarantees early on.

Is it possible to get a mortgage loan against a plot?

Yes, this would be a development finance loan. To find out more, read our Easy Guide to Development Finance.

Can you get a development finance loan to buy a shop or a commercial property?

Yes, this is a specialist type of loan called Commercial Property Development Finance. See below.

What is Commercial Property Development Finance?

Property finance that is loaned for the development of a commercial property. This includes offices, warehouses, logistics space, student accommodation, retail space and PRS (private rental properties).

Want to learn more about development finance so you can win more clients?

Click here for our Development Finance FAQ’s / Explainers