For property developers
Property Development Finance
Development finance is short-term funding for building new property or carrying out major conversions. The lender funds part of the land purchase and releases the build costs in stages as work progresses, with interest charged only on what's been drawn.
Funding Plus compares development lenders for ground-up builds, conversions and heavy refurbishments, from first-time developers to experienced builders.
- Build costs released in stages
- Interest only on funds drawn
- Options for first-time developers
Reviewed by the Funding Plus team · Last updated October 2026
Step 1 of 3 · Development Finance
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Development Finance at a Glance
- Facility size
- £250k – £50m
- Terms
- 6 – 36 months
- Lending
- Up to 60% – 70% of GDV
- Security
- The site
- Best for
- New builds and conversions
Typical figures across the market. Your offers depend on your business, the lender and the security available.
How Development Finance Works
- 1Share your appraisalSite cost, build costs, timescale and the expected sale value when finished.
- 2Get termsLenders set the facility size, rate, fees and how much of the land and build they'll fund.
- 3Monitoring surveyor sign-offAn independent surveyor checks the costs and programme before each release.
- 4Build, draw and exitFunds are released in stages, then repaid from sales or a refinance.
How Much Does Development Finance Cost?
Development finance is priced with an interest rate on drawn funds plus arrangement and exit fees. Because funds are drawn in stages, the total interest depends on how quickly you draw and how long the build takes.
- Interest on drawn funds, usually rolled up
- Arrangement fee, often 1% to 2%
- Exit fee on some facilities
- Monitoring surveyor, valuation and legal costs
Worked example
An 18-month build
- Facility
- £1,100,000
- Average amount drawn
- £600,000
- Interest rate
- 9% a year
- Term
- 18 months
- Estimated interest
- £81,000
Illustrative only, not a quote. Interest depends on your drawdown schedule. Fees not included.
Who Can Get Development Finance?
- A site with planning permission (or near it)
- A credible appraisal with costs and end values
- Your own money in the deal, usually 10% to 30%
- A professional team: contractor, architect, QS
- Development experience helps, but first-timers can be funded
What You'll Need to Apply
- Development appraisal
- Planning permission and drawings
- Build cost breakdown and programme
- CVs of the developer and professional team
Pros and Cons of Development Finance
Advantages
- Funds most of the build
- Interest only on what you've drawn
- Rolled-up interest helps cash flow
- Specialist lenders understand development risk
Things to watch
- Cost overruns can stall drawdowns
- Delays increase interest costs
- Personal guarantees are common
- The site is at risk if the exit fails
Types of Development Funding
Senior development finance
The main facility, funding most of the land and build costs.
Mezzanine finance
A second layer of funding to reduce how much of your own money you put in.
Development Finance vs Other Options
| Option | Best for | Typical speed | Security |
|---|---|---|---|
| Development finance | Ground-up builds and conversions | 4 – 10 weeks | The site |
| Bridging loan | Purchases and light refurbishment | 1 – 3 weeks | Property |
| Commercial mortgage | Holding finished property | 4 – 12 weeks | The property |
| Secured business loan | Raising funds against other property | 2 – 6 weeks | Property |
Who Uses Development Finance?
Development finance is used by developers, builders and businesses expanding their own premises.
Customer story
“[Real customer story for Development Finance: what they needed, how quickly it was arranged and what it let them do.]”
[Name], [Role], [Business name] · [Amount] development finance
Development Finance FAQs
What is GDV?
Gross development value: what the finished development is expected to be worth. Lenders cap their lending at a percentage of it.
Can a first-time developer get finance?
Yes, with a strong professional team and a smaller scheme. Expect to put in more of your own money.
How are funds released?
In stages after each inspection by the lender's monitoring surveyor confirms the work is done.
What if the build runs over?
You may need to fund overruns yourself, and interest keeps building. Most lenders expect a contingency in your budget.
Do I need planning permission?
Usually yes. Some lenders fund land without planning through bridging, then switch to development finance once it's granted.
Related Guides
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