Property Development Finance - Business Expert
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Whether you are a commercial property developer, landlord, or investor looking for finance to develop or purchase property, there are a range of options available to you.

Since property finance is a complex area, our handy guide aims to explain the basic concepts so that you can make the best decision possible for your situation.

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How to Finance Property Development?

Development finance is the term applied to the range of finance options focussed on the property sector. This includes bridging loans, development finance, commercial mortgages (including buy to let) and auction finance.

The finance in this sector is tailored towards the speed and flexibility required by developers.

How Does Property Development Finance Work?

Property development loans are essential short term loans, usually over a period of between 6 and 18 months. They assist with either the purchase or refurbishments of particular projects and are usually geared in stages.

The first part of the funding is released to help with securing the property in the first place. The second stage is released to help with building and contstruction costs during the refurbishment stage. These staggered payments are termed ‘drawdowns’ and the interest is charged when each of these is made.

This type of finance often requires an Independent Monitoring Surveyor (IMS) who will oversee the building works on behalf of the lender, bringing any potential issues to their attention if he/she feels it is warranted.

Property Development Finance Options

Bridging Loans

Development Finance

Commercial Mortgages

Auction Finance

What Type of Property Development Finance Do I need?

Understand which type of finance is best suited for your situation will come from matching your project type, scope and time frame with the appropriate solution.

Short Term Refurbishment Project – A bridging loan known as a ‘refurbishment bridge’ would likely be the best solution here. This 3 to 4 month loan sometimes come with the option to be converted into a mortgage when it runs out.

Major Renovation Work – Serious work over a longer time frame would likely require either a long term bridging loan or a commercial mortgage.

Ground up Development – When a major development project is required, perhaps building from scratch upon a piece of land, development finance would be the appropriate choice.

Use Our Property Development Finance Application Checklist

While every lender has their differences, most will require the following basic information before considering funding.

  1. Details about your company and your development track record, if any. They are looking for evidence of experience and proven returns.
  2. Architectural Drawings / Detailed Development Plans with time frames
  3. Detailed breakdown of project costs
  4. Estimated Gross Development Value (GDV)
  5. Timeframes and construction schedule
  6. Details of assets and liabilities from your company, including a list of directors
  7. Several years business accounts and tax returns
  8. Exit Strategy details

How Much Can You Borrow with Development Finance?

Development finance allows you to borrow around 50-60% of the purchase price for a new project. Or up to 100% of the purchase price assuming that is no more than 60-70% of the gross development value.

How much you can borrow depends on several factors:

  • Your credit history and liabilities
  • How much security you have
  • How long you need the finance for
  • Your track record of delivering successful property development projects

Can I Get Property Development Finance Without Planning Permission?

Certain lenders do offer the option of borrowing before the official granting of planning permission, though it is rare.

It must be demonstrable that planning permission is formality only, and likely to occur within a measurable time frame

With bridging finance, the bridging loan lender will almost certainly reduce the borrowing LTV in this scenario.

Property Development Finance FAQs

How do I get Funding for Property Development?

How Much Deposit do I need for Property Development?

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