Development Finance London

Development finance is structured funding for property construction, conversion or major refurbishment projects, usually with funds released in stages against progress and lender monitoring.

The lender assesses the site, planning, costs, borrower, professional team, projected value and exit. An initial advance may support acquisition or refinance, followed by staged drawdowns for eligible works.

Potential projects include new-build housing, apartment schemes, conversions, mixed-use projects, commercial development and substantial refurbishment, subject to planning, viability and lender appetite.

The facility depends on land value, purchase price, development costs, projected gross development value, borrower equity, experience and lender policy.

Gross development value, or GDV, is the estimated value of the completed development. Lenders use an independent valuer’s assessment rather than relying solely on the developer’s estimate.

Loan to cost compares the development facility with qualifying project costs. Definitions differ between lenders, so confirm which costs are included.

Most lenders require satisfactory planning before completion. Some planning-risk or pre-planning facilities exist, but they are more specialist and require a strong downside position.

Experience is important. Some lenders consider first-time developers where the professional team, equity, project and support are strong.

The required equity depends on purchase price, land value, costs, leverage and lender. The source of funds must be evidenced.

Works funding is commonly drawn in arrears after an independent monitoring surveyor assesses progress and eligible expenditure.

The monitoring surveyor reviews the development for the lender, including progress, cost-to-complete, variations and drawdown recommendations.

Some facilities include eligible professional and statutory costs within the appraisal, but treatment varies and not every cost is funded.

Yes. Conversions may be funded where planning, building regulations, title, costs, experience and end values are acceptable.

Potentially. The lender will assess the legal basis, prior approval, conditions, building regulations, proposed use and market demand.

Potentially. Offices, industrial, retail, hospitality and mixed-use schemes may be considered where demand, income or sale exit is credible.

Potentially. An existing bridge or land loan may be refinanced when planning and project information support a development facility.

Common exits are sale of completed units, refinance onto investment finance or a combination. The lender will test timing, values, sales costs and refinance affordability.

Potentially. The completed property, rent, borrower and portfolio must meet the proposed term lender’s criteria.

Lenders normally expect a cost contingency appropriate to project risk. The amount depends on the scheme, procurement and lender.

The developer may need to fund overruns, additional equity or revised contingency. The lender may pause drawdowns if cost-to-complete is not covered.

Mezzanine or stretched senior finance may reduce the equity requirement but increases cost and complexity. Intercreditor and security arrangements must be acceptable.

Yes, subject to clear ownership, governance, equity, guarantees, responsibilities and experience.

Some lenders consider overseas borrowers, subject to enhanced ownership, identity, tax, sanctions, source-of-funds and legal checks.

Timing depends on valuation, monitoring, legal work, planning, cost information, experience and lender due diligence. Complete information helps avoid preventable delay.

Potential costs include interest, arrangement fees, valuation, lender and borrower legal fees, monitoring surveyor fees, broker fees, quantity surveying and exit or extension costs.

Interest may be rolled up, retained, serviced or combined, depending on the lender, leverage and cash flow.

Typical information includes planning, drawings, cost plan, programme, professional team, experience schedule, appraisal, borrower details, source of equity and exit evidence.

Potentially. A bridge may acquire or hold a site before planning or development readiness, but the cost and refinance route must be carefully tested.

Yes. Call Shadowfax Funding Solutions on 0208 154 6052 to discuss the site, planning, costs, experience and intended exit.

A broker can help package the appraisal, identify lenders suited to the project and coordinate the application with the lender, valuer, monitoring surveyor and solicitors.