Commercial & Specialist Finance Solutions

Development finance is a specialist type of funding used to support property development projects, from initial land purchase through to construction and completion. In the UK, it plays an important role in supporting housebuilding, commercial development and wider regeneration by giving developers access to the capital needed to move projects forward.

Below are some of the key terms you’ll commonly come across when exploring development finance.

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Development Loan
Funding provided to cover the costs of developing a property, often released in stages as the build progresses.

Land Purchase
Finance used to acquire a site intended for development, either on its own or alongside build funding.

Construction Costs
All costs associated with the build or refurbishment, including labour, materials and professional fees.

Repayment Terms
The structure agreed with the lender for repaying the loan, which may include rolled-up interest, monthly interest payments, or repayment on completion.

Exit Strategy
The plan for repaying the loan, usually through the sale of the completed development or refinancing onto a longer-term product.

Loan to Value (LTV)
The percentage of the property’s value that a lender is willing to advance.

Debt Service Coverage Ratio (DSCR)
A measure used by lenders to assess whether income generated by the project can comfortably cover loan repayments.

Interest Rate
The cost of borrowing, typically charged as a percentage of the loan and influenced by risk, project type and experience.

Security
Assets used to support the loan, commonly the development property itself and, in some cases, additional property or guarantees.

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Types of Development Finance

 

Acquisition Finance
Used to purchase land or existing buildings intended for development.

Construction Finance
Funding released in stages to support the build or refurbishment process.

Mezzanine Finance
A higher risk layer of funding that sits behind senior debt, often used to increase overall borrowing where needed.

Bridging Finance
Short term funding designed to cover timing gaps, such as buying a site before longer term finance is in place.

Joint Venture Finance
A structure where an investor provides capital in return for a share of the project’s profits, rather than charging traditional interest.

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Factors Affecting Development Finance

 

A number of key elements affect whether development finance is available and on what terms.

Scheme Strength

Lenders will look closely at how realistic the project is, including build costs, timelines and expected returns.

Developer Background
Your experience matters. A solid track record, relevant past projects and a clear understanding of the process can all improve lending terms.

Market Conditions
Wider economic factors and property market trends play a role, particularly around demand, pricing and exit strategies.

Site Location
Where the development is based is critical. Strong locations with proven demand are generally viewed as lower risk.

Lender Risk View
Each lender will assess potential issues such as planning risk, build complexity and market volatility before making a decision.

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Understanding the Development Finance Process

 

Arranging development finance isn’t always straightforward. Working with specialists who understand the market can make a significant difference, from structuring the deal correctly to securing competitive terms.

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Compariqo provides access to a wide range of development finance options designed to suit different project types. Whether you’re purchasing land, funding a build or exploring short-term bridging solutions, our team can help identify funding that fits your plans.

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Does your next project require Development Finance?

 

Contact us today to discuss your project and get a free quote.