What is development finance?

Updated October 2026

Development finance is a loan to a developer that funds the purchase of land or a building and the cost of constructing or converting it, secured by a first charge over the site, drawn in stages as the work is done and repaid in one sum when the finished units are sold or refinanced. It is short-term, running for the length of the build plus a sales period, and the interest is usually rolled up and paid at the end rather than serviced during the build. The lender’s decision rests on the scheme, the developer’s record and the end value before it rests on the developer’s income.

It differs from a bridging loan in that the money is released against work certified by the lender’s monitoring surveyor rather than in one advance, and from a commercial mortgage in that it is repaid from the scheme rather than over a term from rent or trading. We have access to a range of UK commercial finance lenders through our principal, White Rose Finance Group Limited. Each lender publishes its own maximum against cost and value, its minimum scheme size and the experience it asks for, and makes its own decision.

What defines it

Four things. The security is the site, by a first legal charge, and the value the lender tests is the value on completion, the gross development value, as well as the value today. The loan is released in stages against the build, each drawdown following a certificate from the monitoring surveyor that the work claimed is done. The interest is rolled up into the facility, so the sum due at the end is larger than the sum drawn. And the exit is the scheme itself: the sales of the units or a refinance on to a term loan once they are let.

How a facility is sized

Against two limits, whichever bites first: a published maximum percentage of the total cost of the scheme, land and build together, and a published maximum percentage of the gross development value. The difference between the cost and the facility is the developer’s equity, which goes in first, usually at the land purchase, before the lender funds a pound of the build. Where a developer wants to put in less, a mezzanine lender may fund a further slice behind the senior lender at a higher price. The loan to value answer works the ratios; no figure for any lender’s maximum appears on this page.

What it costs, as a structure

Interest at a rate stated in the facility, charged on the sum drawn and rolled up; an arrangement fee on the facility; an exit fee, on some facilities, charged on repayment and sometimes on the gross development value rather than the loan; the monitoring surveyor’s fees for the initial report and each drawdown visit; the valuation fee; and the legal fees of both sides. Each lender publishes its own, and we set out what each provides so you can compare them.

What it is not

It is not a bridging loan, although the two overlap on a light refurbishment, where a bridge funds a property that will be improved and sold without staged drawdowns. It is not a commercial mortgage, which is a long-term loan on a finished building. It is not available for a property the developer or a family member will live in, which is a regulated mortgage contract we do not arrange. And it is not funding for a scheme without planning consent: a site bought before consent is a land purchase, funded on different terms until consent is granted.

For property-secured lending we work with UK limited companies and LLPs only, for business and commercial purposes. Enquiring does not affect your credit score. If you apply to a lender, it runs its own credit search, which may be recorded on your file.

Where to read next

The development finance page sets out the product in full with staged drawdown, what lenders publish and what experience they ask for. The first-time developer page covers a developer with no completed scheme. The mezzanine finance answer explains the slice above the senior facility, and the bridging loan against development finance answer draws the line between the two.

Frequently asked questions

How is development finance drawn down?

In stages. The land or the first tranche is advanced at completion; each later drawdown follows the monitoring surveyor’s certificate that the work claimed has been done and the costs are in line with the appraisal.

Do I pay interest during the build?

Usually not. The interest is rolled up into the facility and repaid with the capital at the exit, which is why the sum due at the end is larger than the sum drawn.

Can a first-time developer get development finance?

Some lenders publish criteria for a developer with no completed scheme, usually on a smaller scheme with an experienced contractor and more equity. The first-time developer page sets out what they ask for.

Is development finance regulated?

CapExpand Ltd (FRN 1060885) is a credit broker and an Appointed Representative of White Rose Finance Group Limited (FRN 630772), which is directly authorised and regulated by the Financial Conduct Authority. We are a broker, not a lender. We work with UK limited companies and LLPs only, for business and commercial purposes. If you have a complaint, our complaints page explains how it is handled. A scheme that includes a dwelling the developer or a family member will live in is a regulated mortgage contract, which we do not arrange.

How is CapExpand paid?

We will receive commission from lenders. On some cases we also charge a fee, which we set out in writing and agree with you before you proceed.

A scheme with planning and a cost plan

The site, the planning consent, the cost plan and the end value are enough for us to check the case against lenders’ published criteria before anything is sent anywhere.

Check your options

Sources

Checked 26 October 2026. This page defines the product; each lender publishes its own maximum against cost and value, fees and criteria, and nothing on this page is a quote.

Important information

Think carefully before borrowing. Property or other assets offered as security may be at risk if you cannot keep up repayments.