Development finance for builders and property developers

How development finance works

Development finance is a short-term loan, typically 6 to 24 months, used to buy a site and pay for the build. Unlike a normal mortgage, the money isn't released all at once. The lender agrees a total facility, releases part of it towards the land, and then pays the build costs in stages. Before each payment, an independent monitoring surveyor checks the work.

Interest is usually rolled up or retained, so it's added to the loan rather than paid monthly. The loan is repaid when the units are sold or refinanced. Lenders size the loan against two measures: loan to cost (LTC), the share of total costs they'll fund, and loan to gross development value (LTGDV), the share of the finished value. Where senior debt doesn't cover enough, mezzanine finance or equity partners can sometimes help close the gap, at a higher cost.

What lenders look at

• The site and planning: full planning permission (or a clear route to it), any conditions and Section 106 or CIL obligations.
• The numbers: land cost, build costs (ideally a QS-reviewed cost plan), contingency, professional fees and the gross development value, backed by local comparable sales.
• You and your team: your track record, plus the contractor, architect and project manager. First-time developers can still borrow, but lenders usually want an experienced team around them and a bigger contribution from the developer.
• The exit: who will buy the units or how the project will be refinanced, and how long that will realistically take.
• Your contribution: how much of your own money goes in, and where it comes from.

The kinds of scheme we see

These are examples of the types of case we handle, not real client stories.

• A small scheme of new houses on an infill plot near Fareham, built by a local builder doing their second development.
• An office or commercial building turned into flats in Southampton or Portsmouth city centre, using permitted development rights or full planning.
• Heavy refurbishment of a large period property in Southsea into licensed HMO rooms or self-contained flats.
• A mixed-use building with a shop on the ground floor and flats above, on a Hampshire high street.
• Development exit finance: a short loan at the end of the build that repays the more expensive development loan while the last units sell.

Development finance across Hampshire and the South Coast

Our local knowledge helps when lenders look at values and demand. In Fareham, Welborne is bringing thousands of new homes and a lot of local building work over the coming years. Portsmouth has little spare land, so most schemes there are conversions and upward extensions. Southampton has a steady flow of city-centre conversions and student-led schemes. We also arrange development finance in Winchester, Chichester, Eastleigh, Havant, Gosport and across the UK.

Our process

• Initial chat: tell us about the site, the planning, your costs and your experience.
• Appraisal check: we review your figures and point out anything a lender is likely to question.
• Lender search: we compare suitable development lenders and explain the likely terms, fees and conditions.
• Application and valuation: we package the case, then coordinate the valuer, the monitoring surveyor and the solicitors.
• Drawdowns: we stay involved through the build to help keep each staged payment on track.

Development finance FAQs

How much can I borrow for a development?

It depends on the scheme and the lender. Senior lenders commonly lend a proportion of total costs and of the finished value, and you'll need to put money in yourself. We'll show you what the numbers are likely to support once we've seen your appraisal.

Can a first-time developer get development finance?

Sometimes. Lenders will look for relevant experience, such as building, refurbishment or project management, and for a strong professional team. They may also ask for a larger deposit. Smaller, simpler schemes are usually the best place to start.

Do I need planning permission first?

Most development lenders need full planning permission before they will fund the build. If you're buying a site before planning is granted, a bridging loan may fund the purchase, followed by development finance once planning is in place.

How are the funds released?

In stages. A monitoring surveyor visits the site, confirms the work done and recommends each release. Good planning of the build programme and cash flow helps avoid delays.

What happens when the build is finished?

You repay the loan from sales or by refinancing. If units take longer to sell, development exit finance or a term loan may be an option. If you'd rather keep the finished units, we also arrange buy-to-let and portfolio finance.

Is development finance regulated?

Development lending to companies and experienced investors for business purposes is usually not regulated by the FCA. If any part of the borrowing is secured on a property you or your family live in, or will live in, it may be regulated. We'll confirm this at the start.

Call 02392 000399 · WhatsApp us · Email charles@vantageacf.co.uk · Send an enquiry

Vantage Asset & Commercial Finance Ltd is a credit broker, not a lender. Vantage Asset & Commercial Finance Ltd is an Appointed Representative of The Fiducia Network Ltd, authorised and regulated by the FCA (FRN 917537). Some commercial, business and buy-to-let lending is not regulated by the Financial Conduct Authority. All finance is subject to status, lender criteria and valuation, and the lender makes the final decision.

Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Registered in England and Wales, company no. 17052739. ICO registration ZC113657.