On average it takes up to six months to complete a development loan. On a scheme where the time between site acquisition and completion is a minimum of 18 months and usually somewhere between two and five years, six months of that spent waiting on finance is expensive.
Most of the delay is avoidable. It comes from incomplete documentation, third-party reports instructed in the wrong order, and personal guarantee conversations that should have happened months earlier.
This blog walks through the development finance application process end to end, drawing on Brickflow's day-to-day experience structuring these deals: what lenders need from you, what the valuer, QS and solicitors each do, how drawdowns work, how personal guarantees are calculated and reduced, and the pitfalls that catch out even experienced developers.
Development finance is a short-term loan used to fund construction, conversion or refurbishment, repaid on sale or refinance. Before a lender will commit, they need to understand the scheme, the numbers and the people. Have the following ready:
The quality of the appraisal and the schedule does a lot of the persuading. Gaps here are where applications can stall.
Once the lender has everything, they will seek credit approval and, if successful, issue credit-backed terms before instructing their own quantity surveyor (QS) and valuer.
Note that these fees are covered by you upfront, even if the loan does not complete.
Once the reports have been assessed by the lender, solicitors are appointed. They can be appointed at the same time as the QS and valuer, but it is normally better to wait to avoid incurring unnecessary costs if the reports throw up a problem.
Once the lender's solicitor is satisfied that all requirements have been met, they will arrange for the land loan to be drawn down.
As works commence, contractors are paid from the build loan. Build loan drawdowns are approved by the lender-appointed QS, who will pre-agree site visits based on milestone events. Keeping that schedule realistic at the outset is what keeps cash flowing on site later.
A personal guarantee (PG) is a legal commitment from the developer to cover the debt personally if the borrowing entity cannot. Because development loans are usually made to a limited company or SPV set up for the project, the guarantee gives the lender a route back to the individuals behind it if things go wrong - the business itself may have no assets beyond the scheme.
PGs are near-universal in development finance. Every shareholder is typically expected to provide one, or the group provides a corporate guarantee instead. As a rule of thumb, guarantees sit somewhere between 15% and 25% of the total loan, though the exact figure moves with risk: a higher LTGDV generally means a higher PG. Lenders also tend to want headroom above the guaranteed amount itself - commonly double - so a £1m guarantee usually needs to be backed by a net asset value north of £2m.
Need to know:
Ultimately, lenders want confidence that you could raise cash quickly against other assets if build costs run over and the loan itself can't absorb it. Their real concern is momentum: a stalled site with contractors walking off the job is the outcome they're guarding against.
In practice, a PG works more as a psychological backstop than a source lenders expect to draw on. It keeps everyone's incentives pointed the same way, and enforcement is a last resort rather than a first response. If a scheme does run into trouble - over time, over budget, or hit by falling prices - the typical sequence is:
Smart decision making is at the core of property development, and there are few decisions more important than choosing the right loan. These are the mistakes even experienced developers make.
Speak to ten lenders about the same deal, and you will get ten different answers. That is ten different loan amounts and ten different pricing structures.
By the law of averages, going to one or two lenders is highly unlikely to return the best available deal. Putting down a large amount of equity as a deposit can often be avoided simply by finding a more generous offer elsewhere, which frees up funds for other schemes and bigger sites, and reduces or removes hefty profit share payouts to investors.
Joining forces with the right partners strengthens a case for funding. The wrong ones harm it. This covers everyone: contractors, shareholders, lenders, and professional partners. We have all heard the stories of feuding partners and sites getting repossessed. Much like a divorce, a fallout is always expensive.
Discuss personal guarantees early when bringing others in. If a partner will not stand behind the PG it is not necessarily game over, but it means their value should be weighted slightly lower than a partner who will commit.
A fragmented market of non-bank lenders brings increased risk alongside greater opportunity. Many of these lenders are credible and bring a welcome dynamic to the market. Some are less trustworthy.
If a lender is offering far cheaper rates or more leverage than anyone else, question why, because they are probably taking undue risk. Make sure every lender passes the credibility test and has the infrastructure to underwrite loans properly, especially if they are new to the market. Watch for hidden terms and get full transparency on the heads of terms. A lender may offer a great rate but insist on a 100% personal guarantee, or additional charges over other assets.
Remember how hard you have worked for your equity. It is not worth risking your future by betting on a bad lender.
It is easy to get weighed down by the mechanics of securing finance and lose sight of the wider economic and political climate. The time between site acquisition or planning application and actual completion is a minimum of 18 months and usually two to five years, sometimes more.
Think how much has happened in the UK in recent years: Brexit, a cyclical economy, legislative change, currency swings, Covid, and a revolving door of Housing Ministers and Prime Ministers. A developer's ability to acknowledge and plan for changes outside their control can make or break a scheme, and their future success.
What Good Execution Looks Like
Case study: 19-unit scheme, Devon. A developer secured funding to acquire and deliver a 19-unit residential scheme on a brownfield, town-centre site in a well-connected Devon town, comprising a mix of bungalows and houses with outline planning consent in place.
- Total project cost: £3.8m
- GDV: £5.485m
- Total loan: £3.86m (70% LTGDV), with 100% of build costs funded
- Term: 19 months, including a 15-month build
- Interest: 10.5% p.a., rolled up
The facility enabled the borrower to acquire the site and fully fund construction, with staged drawdowns aligned to build progress. Rolled-up interest preserved cash flow throughout, supporting delivery through to sale.
Case study: 104-unit part-built scheme, Southampton. A distressed opportunity sourced via Brickflow, turning £2.8m of equity into c. £4.8m of projected profit in 15 months. The scheme was already under construction, reducing early-stage planning and groundwork risk, and the strategy was to inject fresh equity, complete the build efficiently and exit via unit sales.
- Total project cost: c. £17.7m
- GDV: £23m
- Equity: £2.8m
- Total loan: £15.4m (67% LTGDV, 87% LTC)
- Term: 15 months
- Interest: 9.25% p.a.
Distressed, part-built assets can offer compelling opportunities when paired with the right funding structure and delivery capability.
Assemble the full documentation pack before you approach anyone, hold the solicitors back until the valuer and QS reports land, and have the personal guarantee conversation with your partners at the start rather than at heads of terms. Then compare the whole market rather than the one lender you know, because that comparison is where the equity saving lives.
If you're preparing to apply, Brickflow's platform can help you build a lender-ready case and compare live terms across the market rather than relying on a single relationship.
Ready to start your application? Build your case and compare lenders with LandInsight.
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