Bridging loan vs development finance: which do I need?
A bridging loan is short-term money secured on a property that already exists and is worth something today. Development finance funds the creation of value that does not exist yet, a build or a major conversion, and is released in stages as the work is certified. If the thing you are borrowing against could be sold tomorrow roughly as it stands, you want a bridge. If it could not, you want development finance.
The grey area is refurbishment. A light refurbishment (decoration, kitchen, no structural work) is bridging. A heavy one (structural, change of use, extending) sits between the two, and 35 of the 53 bridging lenders on our panel will fund it as a bridge, drawing the works money in stages the way a development lender would.
The two products side by side
Both are secured on property, both are short-term and both are priced above a mortgage. The differences are in what the lender is looking at and how the money comes out.
| Bridging loan | Development finance | |
|---|---|---|
| Secured on | A property with value today | A site plus the scheme being built on it |
| Sized on | Loan-to-value of the property now | Loan-to-cost and loan-to-GDV of the finished scheme |
| Drawn | Usually in one go (works money staged on heavy refurbs) | In stages against a monitoring surveyor's certificates |
| Interest | Monthly, often rolled up | Annual rate, rolled up, plus arrangement and exit fees |
| Term | 1 to 24 months, commonly 12 to 18 | 12 to 24 months or longer, matched to the build |
| Typical exit | Sale or refinance onto a term mortgage | Sale of units or refinance onto investment mortgages |
| Speed to complete | A clean case in about 2 to 6 weeks | Longer: planning, costings, monitoring surveyor and legals |
What our panel charges
Spans are drawn from live products on our panel at a common benchmark, cleaned of outliers, checked September 2026. They are facts about products, not an offer to you; the rate on any case depends on the property, the plan and the borrower.
- Bridging, monthly interest at 70% LTV: 0.6% to 2% a month, median around 0.9%, across 290 products.
- Bridging arrangement fee: 1% to 4%, median around 2%.
- Development finance annual rate: 7% to 18%, median around 9.9%, across 74 products.
- Development maximum loan-to-cost typically around 85% and loan-to-GDV typically around 70%.
How to tell which one your project is
Ask what the lender would be lending against on day one. A tired house bought at auction to redecorate and sell is a bridge: the house is the security and the works are cosmetic. A house being split into flats with a new roof and steel beams is a heavy refurbishment bridge for most of our panel, but a development loan for some, because the value the lender is relying on only exists once the work is done. A plot with planning for six houses is development finance, full stop: there is nothing to bridge against.
The practical test used by lenders is whether the works need a monitoring surveyor. If the money has to be released against certified progress, you are in development territory whatever the product is called.
What the panel says
Distinct lenders on our panel with at least one live product matching each criterion. A guide to how wide each door is, not a promise about any case.
- 53 bridging lenders and 51 development lenders on the panel.
- 35 bridging lenders fund a heavy refurbishment; 16 will bridge on land with planning.
- 16 development lenders will fund a first-time developer; 27 allow planning gain.
- 33 bridging lenders will re-bridge a loan that has run out of term, the usual rescue when a build overruns.
When you need both
A common sequence: bridge to buy the site quickly (an auction, or a vendor who will not wait for planning), then refinance onto development finance once planning is granted and the costings are in, then exit to sales or an investment mortgage. Each step has its own lender list and its own fees, so the total cost of the sequence, not the rate on any one leg, is the number to plan around.
We introduce limited companies and LLPs to the bridging and development lenders whose criteria fit the property, the plan and your experience, and we say which product it is before anything is submitted. This page is general information, not advice.
Frequently asked questions
Is development finance more expensive than bridging?
On the headline rate, usually: development lenders on our panel run 7% to 18% a year against a bridging median of around 0.9% a month at 70% LTV, which is roughly 10.8% a year. But interest on development finance is charged only on what has been drawn, so a staged facility often costs less in total than the headline suggests. Compare total cost over the project, not the rate.
Can I use a bridging loan to build?
For a light or heavy refurbishment, yes, with the lenders that fund works. For a ground-up build or a major conversion where the value only exists at the end, no: the lender has nothing to bridge against and you need development finance.
Do I need experience to get development finance?
Not always. 16 development lenders on our panel will fund a first-time developer, usually on a smaller scheme, at a lower leverage, and with an experienced contractor and a monitoring surveyor in place.
What happens if the build overruns the term?
The lender's default rate applies, which is expensive, so act before it starts. 33 bridging lenders on our panel will re-bridge an expiring loan, and a development lender will sometimes extend against a revised programme. Our re-bridging page covers the options.
Not sure which one your project is?
Tell us what the property is now, what you plan to do to it, and when you need the money. We say which product it is and which lenders fit, before anything goes anywhere.
Sources
Checked September 2026. Rate spans are facts about panel products at a stated benchmark, not offers; every case is priced by the lender on the property, the plan and the borrower.
Important information
CapExpand Ltd is not authorised by the Financial Conduct Authority and can only complete non-regulated introductions. We work with UK limited companies and LLPs only, for business and commercial purposes. We are not a lender and we do not provide financial, tax or legal advice. We do not arrange regulated residential mortgages, consumer buy-to-let mortgages or any other regulated mortgage contracts. We work with a panel of lenders whose particulars are available on request, and we receive commission from the lender if a deal completes, at no cost to you. All lending is subject to status, valuation where applicable and the lender's own checks.
Registered office: Pure Offices, Lake View Drive, Annesley, Nottingham, NG15 0DT. Company No. 14433858.
CapExpand Ltd (Company No. 14433858) is a commercial finance introducer, not a lender. We are not currently authorised or regulated by the Financial Conduct Authority and do not provide financial advice. All information on this page is for educational purposes only. Funding is subject to status and lender criteria. CapExpand will receive a commission from providers at no extra cost to you.