A scheme can have a brilliant site, a watertight planning strategy, and a GDV that makes sense on paper - and still fall over at the finance stage. More deals die because the numbers don't stack up for a lender than because the site itself was wrong. So if you're researching development finance, you're asking the right question at the right time.
Here's the catch: almost everything written about development finance online is written by a broker trying to win your business. That's not a criticism, it's just how the market works. But it does mean most "guides" are sales pages wearing an explainer's clothing.
This one isn't. We don't lend, and we're not a broker, so we've got no reason to steer you toward one product over another. What follows is the practical, impartial version: how property development loans actually work, the types of development finance available, what lenders and brokers do, what it all costs, and - the part most guides skip entirely - how to know whether your scheme is fundable before you sit down with a lender.
Development finance is short-term, specialist lending designed to fund the ground-up construction or heavy refurbishment of a property scheme. Facilities typically run for 9 to 36 months, which is deliberately short, because the lender wants the debt gone once you sell or refinance, not sitting on their books indefinitely.
Unlike a mortgage, you don't receive the full loan on day one. Development finance is released in tranches, drawn down against agreed build milestones, foundations complete, wall plate stage, roof on, and so on. Before each drawdown is released, a monitoring surveyor (appointed by the lender, but usually agreed with you) visits the site to confirm the work has actually happened. It's a system built around risk control, and it's worth understanding early, because it shapes your cash flow throughout the build.
So how much can you actually borrow? Lenders work to two caps:
Whichever cap produces the lower number is the one that governs. This trips a lot of developers up. You might comfortably clear the LTC threshold, but if your GDV is optimistic, the LTGDV cap will pull your available borrowing down regardless. It's a good early sign of how connected finance is to appraisal, a theme we'll come back to.
Finally, every lender will ask about your exit strategy before they commit a penny. How will the loan actually be repaid, sale of the completed units, refinance onto a term facility, or something else? A vague answer here is one of the fastest ways to stall an application, even when the rest of the scheme looks solid.
Not every project needs the same shape of funding. Here's the landscape, in roughly the order you'd encounter it:
The standard, first-charge facility most people mean when they say "development finance". Sized against LTC and LTGDV, released in stages, and the most common route for straightforward ground-up schemes.
A short-term facility, often used to move quickly, secure a site, cover a funding gap between purchase and full development finance drawdown, or bridge to sale. Bridging loans are faster to arrange than a full development facility but typically carry a higher rate, reflecting the speed and flexibility on offer. If you've found a site that won't wait for a lengthy funding process, this is usually the tool that gets you there.
Sits behind senior debt, second charge, and tops up your borrowing beyond what the senior lender alone will provide. It's more expensive because the risk to the mezzanine lender is higher, but it can reduce how much of your own equity you need to put in.
Rather than lending against interest, a JV partner contributes capital in exchange for a share of the profit. This is often how developers with a strong pipeline but limited equity get schemes moving, though it does mean sharing the upside.
Used once construction is complete but sale or refinance hasn't happened yet, typically to repay an expensive development loan with a cheaper facility while units are marketed. A useful tool if the market's slower than you hoped at completion.
Where do construction loans fit in all this? "Construction loan" is often used interchangeably with development finance, particularly for the build-cost element of a scheme, but in UK lending it usually sits under the same senior debt umbrella described above rather than as a distinct product.
Which type suits your scheme depends on timing, how much equity you're putting in, your risk appetite, and how confident you are in your exit. If you want a fuller breakdown of debt versus equity routes, our guide to development funding options goes into more depth. None of this is one-size-fits-all, which is exactly why the next section matters.
The lender landscape is broader than most developers realise, and it's worth knowing your options before you assume the high street is your only route.
Historically cautious on development finance, and often reserved for experienced developers with strong track records and larger schemes.
Lenders who focus specifically on this market. They tend to understand the sector's risks better, move faster, and are often more flexible on smaller or first-time schemes, though pricing varies widely.
Faster still, more flexible on criteria, and useful when speed matters more than headline rate.
So, do you need a broker? A development finance broker's job is to match your scheme to the right lender, negotiate terms, and manage the application process. Fees are typically around 0.75% to 1% of the loan amount, paid by you or sometimes built into the facility.
Is it worth it? Honestly, it depends on your experience. A good broker has relationships across dozens of lenders, knows who's actively lending on your scheme type this quarter (lender appetite shifts constantly), and can often get better terms than you'd negotiate solo. If you're newer to development finance, or your scheme is unusual, a broker's market knowledge is genuinely valuable. If you're an experienced developer with existing lender relationships, you may not need one.
Whichever route you take, don't compare offers on headline rate alone. Look at the full fee stack (more on that next), how flexible the drawdown schedule is, how responsive the lender is once you're on site, and whether the exit terms are realistic for your scheme. A slightly higher rate with a lender who releases drawdowns quickly can be cheaper overall than a lower rate with a slow, bureaucratic one.
Development finance rates aren't published like mortgage rates. They're set case by case, priced against the specific risk of your scheme, your experience, the location, the loan-to-value, and current market conditions. Rates are also usually quoted monthly rather than annually, which catches out developers doing back-of-envelope maths against a residential mortgage rate. We won't quote a "typical" figure here, because whatever we wrote today would be stale within a quarter. Rates move, and any guide that gives you a hard number is guessing.
What we can be specific about is the full cost stack, because this is where developers consistently underestimate their numbers:
Add these to the headline interest rate and the true cost of a facility can look quite different from the number on the term sheet.
One lever within your control: the drawdown schedule. Interest on development finance typically rolls up on the amount drawn, so a well-planned drawdown schedule, only pulling down funds as you need them, rather than early, reduces the interest you accrue over the life of the loan. It sounds obvious, but it's an easy thing to get wrong under the pressure of a live build programme, and the saving over a 12 to 18 month scheme can be meaningful.
Here's the section most development finance guides skip entirely, because it happens before a lender ever gets involved.
Every lending decision comes back to two numbers: GDV and land cost. Get either wrong at the appraisal stage, and no amount of broker skill or lender relationship will make the finance stack up later. An overoptimistic GDV inflates what you think you can borrow against LTGDV. An underestimated build cost skews your LTC. Both lead to the same outcome, a scheme that looks fundable on your spreadsheet and isn't on the lender's.
This is really the crux of the whole exercise: finance is a downstream decision. The upstream decision, what you pay for land, what the scheme is realistically worth once built, and whether the numbers leave room for a lender's margin as well as your own, is where the outcome is actually decided. Get the appraisal right, and the finance conversation becomes far more straightforward.
This is where LandTech sits differently to every broker page on this topic. Tools like LandInsight let you assess a site's potential before you've committed to it, so you walk into a lender or broker conversation already knowing your realistic GDV, your land cost ceiling, and what your scheme can plausibly borrow. (If you want the detail on either of those numbers, our guides to valuing land and calculating residual GDV and building a lender-ready development appraisal go deeper. Our Appraisal Tool is built to make that process quicker.)
Once your appraisal stacks up, LandFund connects that groundwork directly to funding, without you having to start the finance search from scratch. It's the end-to-end path that a broker page, understandably, can't offer you, because a broker's job starts where yours with LandTech has already begun.
Know what your scheme can borrow before you approach a lender. Appraise it with LandTech, and explore funding with LandFund.
How much can I borrow for a development?
Lenders cap borrowing against the lower of Loan to Cost (LTC) and Loan to GDV (LTGDV), so the answer depends on both your build cost and your realistic finished value, not just one or the other.
Can you get 100% development finance?
Rarely from a single senior lender. It's usually achieved by combining senior debt with mezzanine finance or a JV partner to cover the gap, rather than one facility funding the whole scheme.
Do I need planning permission before applying?
Most lenders want detailed planning permission in place, or very close to being secured, before they'll commit funds, since it materially reduces their risk. Our planning content hub covers the current planning landscape in more depth, and Planning Portal is the official government-backed resource for checking permission requirements on a specific project.
How long does development finance take to arrange?
Anywhere from a few weeks for a straightforward bridging facility to two or three months for a full development loan with detailed due diligence. Starting the appraisal and lender conversations early avoids this becoming a bottleneck.
What is the difference between development finance and a bridging loan?
Development finance is staged lending released against build milestones over the life of a construction project. A bridging loan is typically a shorter, single facility used to cover a gap, buying a site quickly, or bridging to sale, rather than funding an entire build programme.