Development finance
Say you have a site with planning for six houses. No mortgage lender can help, because the thing worth lending against doesn't exist yet. Development finance can: it funds the build in stages against what the finished scheme will be worth. We introduce limited companies and LLPs to a panel of development lenders and lay out the options that fit the project.
By the CapExpand Team, led by Alex Beardsley
·Updated July 2026
65–70% of GDV
Typical facility cap
Up to 100%
Of build costs
12–24+ months
Typical terms
No fee
You never pay us
The short version
Development finance funds a build or major conversion in stages. The facility is typically capped at around 65–70% of the finished scheme's value (the GDV), can cover up to 100% of the build costs, and runs for 12–24+ months, with funds released against monitored build progress. The exit is a sale or a refinance. Lenders care most about the GDV, the build costs, the planning status and your experience. We don't give advice, but we'll explain how it works so you can choose.
What development finance is
Development finance is short-term lending for building projects, secured on the site and sized on what the finished scheme should be worth, not just what the site is worth today. That is what separates it from a mortgage or a bridge. The lender is funding something that does not fully exist yet, so the money is released in stages as the work is done, and the loan is repaid in one go when the scheme is sold or refinanced.
Terms typically run 12 to 24 months and longer for bigger schemes. It sits alongside bridging finance for lighter, faster jobs and commercial mortgages for long-term ownership. Our property finance overview covers how the three fit together, and we introduce limited companies and LLPs to a panel of lenders for all of them.
Who it's for
Broadly, three kinds of project:
Ground-up builds
New constructionHouses, flats or commercial units built from a cleared or bare site. The classic development finance case, and the one where experience counts most.
Major conversions
Change of useThe structure exists but what comes out the other end is a different building: offices into flats, a pub into housing, a barn into homes.
Heavy refurbishment
Structural worksExtensions, basement digs, full reconfigurations. Substantial enough that lenders fund it in stages against the end value.
Not sure it’s heavy enough?
Might be bridgingCosmetic or light refurbs are usually better suited to bridging, which is quicker and simpler. See the FAQ below on development vs bridging.
A note on who we take on
We currently work with UK limited companies and LLPs only, on a non-regulated basis. We are not authorised by the Financial Conduct Authority and do not arrange regulated residential mortgages or lending to individuals.
How staged drawdown works
Unlike a mortgage, the money does not all arrive on day one. A typical facility splits into a land tranche and a series of build tranches:
- ✓Day one: an initial tranche goes towards the land or site purchase, alongside your own equity.
- ✓During the build: funds are drawn down in arrears against work completed, usually monthly or at agreed stages.
- ✓Each drawdown: a monitoring surveyor appointed by the lender inspects the site, checks progress and costs against the appraisal, and signs off the release.
- ✓Interest: charged only on funds drawn, and usually rolled up into the loan rather than paid monthly, so the scheme is not draining cash while nothing is selling.
The practical upshot: your cashflow plan matters. Contractors get paid before the drawdown that reimburses the work is released, so you need enough working capital to stay a stage ahead.
How lenders size a facility
Lenders weigh four things: the gross development value (GDV) of the finished scheme, the build costs, the planning status, and your experience. The headline constraint is the GDV cap, typically around 65–70% of GDV across the whole facility, within which lenders will often fund up to 100% of the build costs.
| What lenders look at | Typical position |
|---|---|
| Total facility | Typically 65–70% of GDV |
| Build costs | Up to 100% funded, within the GDV cap |
| Term | 12–24+ months, matched to the build programme |
| Release | Staged drawdowns against monitored progress |
| Pricing | Rate typically quoted monthly, usually rolled up |
A general guide, not a quote. Every scheme prices on its own numbers.
A worked example (indicative only)
Say the finished scheme has a GDV of £2m and the build costs are £900k. At a 65% GDV cap, the maximum total facility is £1.3m. If the lender funds the full £900k of build costs, that leaves up to £400k of the facility available towards the land, with your equity covering the rest of the land price plus fees. Illustrative numbers to show how the cap works, not an offer or a quote; the valuer's GDV and the lender's appetite set the real figures.
What experience lenders want
Track record is the soft factor that moves hard numbers. A developer with two or three comparable schemes behind them will generally see better leverage and pricing than a first-timer on the same site. Lenders typically want to see:
- ✓Completed schemes of a similar type and scale, ideally with the numbers to show they worked
- ✓A credible professional team: main contractor, architect, quantity surveyor
- ✓A realistic build programme and costed appraisal, not back-of-envelope figures
- ✓Planning permission in place, or a clear route to it, for the scheme being funded
Thin on experience? It is not always fatal. Partnering with an experienced contractor, starting with a conversion rather than a ground-up build, or putting in more equity can all bring lenders back to the table. Expect personal guarantees from directors on most deals either way.
What it costs
Development finance is priced for the risk of funding something unbuilt, so it costs more than a term mortgage and comes in more pieces. Budget for:
- ✓Interest: typically quoted as a monthly rate, charged on drawn funds and usually rolled up to repay at the end
- ✓Arrangement fee: charged by the lender on the facility, typically added to the loan
- ✓Exit fee: some lenders charge a fee on repayment, calculated on the loan or occasionally on the GDV, so check which
- ✓Monitoring surveyor fees: for the initial report and each drawdown inspection
- ✓Professional fees: valuation, lender and borrower legals, and your own design and QS costs
Compare offers on the total cost to the end of the scheme, not the headline monthly rate. A cheap rate with a heavy exit fee can cost more than the dearer-looking alternative. We lay the numbers side by side so you can see it.
The exit: sell, refinance or hold
Development finance is repaid in one lump, so lenders want a credible exit before they lend. There are three usual routes:
- ✓Sell: units are sold on completion and the sale proceeds repay the facility. The classic trader-developer model.
- ✓Development exit: refinance the completed scheme onto a cheaper short-term product that repays the development lender and gives you time to sell at full value instead of under deadline pressure.
- ✓Finish and hold: keep the units, let them, and refinance onto a term loan or investment mortgage so the development debt is cleared and the scheme becomes a long-term asset.
If holding is the plan, it is worth lining up the term mortgage conversation early rather than at month 22. And if the "development" is really a light refurb with a quick resale, bridging may be the simpler tool for the whole job.
How it works
Tell us about the scheme
The site, the planning position, the GDV and build costs, your experience and your timescale. Two minutes on the form or a call.
We match you to lenders
We put the scheme to the development lenders on our panel with appetite for that type, size and location of project.
You get terms to compare
We talk you through the facility size against GDV, the rate, the fees, the drawdown schedule and the conditions, and flag the catches.
Valuation, legals, drawdowns
The valuer confirms the GDV, the monitoring surveyor reviews the appraisal, the legals complete and the land tranche lands. Build tranches follow as the work is signed off.
Common questions
How much deposit do I need for development finance?▼
It is driven by the scheme rather than a fixed percentage. Facilities are typically capped at around 65% to 70% of the gross development value, and within that lenders will often fund up to 100% of the build costs. Your cash usually goes into the land, so the bigger the gap between the land price plus build costs and that GDV cap, the more you need to put in. On a typical scheme expect to contribute a meaningful slice of the land cost, though a strong site bought well can shrink that.
Can a first-time developer get development finance?▼
Sometimes, but the terms reflect the risk. Lenders lean heavily on track record, so a first ground-up scheme with no history is the hardest thing to fund. It helps to start smaller, bring in an experienced main contractor or project manager, and put in more of your own cash. A professional team the lender recognises goes a long way too. Some lenders have appetite for first-timers on lighter schemes such as conversions, others will not look at them at all, and we can tell you which camp your project falls into.
Development finance vs bridging, which one?▼
It comes down to how much building you are doing. Bridging suits a purchase or a light-to-medium refurbishment where the money is advanced largely up front and the works do not fundamentally change the property. Development finance suits ground-up builds, major conversions and heavy structural refurbishments, because it is sized on the end value and released in stages as the work is signed off. If your project is mostly cosmetic, bridging is usually simpler and quicker. If you are creating something that does not exist yet, it is development finance territory.
What is GDV and why does it matter?▼
GDV is the gross development value: what the finished scheme should be worth once the work is complete, based on a valuer’s assessment rather than your own hopes. It matters because it is the anchor for the whole facility. Lenders typically cap total lending at around 65% to 70% of GDV, so the valuer’s number, not the asking prices you have seen locally, sets the ceiling on what you can borrow.
How are the funds actually released?▼
In stages. There is usually an initial tranche towards the land or site purchase on day one, then the build funds are drawn down against progress. A monitoring surveyor appointed by the lender visits the site, confirms the work claimed has been done to the value claimed, and signs off each drawdown. You only pay interest on what has been drawn, which is why staged release usually works out cheaper than taking everything up front.
Do I need planning permission before applying?▼
For a full development facility, lenders generally want planning in place, or at worst a decision imminent, because the GDV and build programme depend on it. If you are buying a site before planning is granted, that is usually a job for bridging or specialist land finance first, refinancing onto development finance once consent lands. Planning status is one of the main things lenders weigh, alongside GDV, build costs and your experience.
What does development finance cost all-in?▼
More than a term mortgage, and in more pieces. Interest is typically quoted as a monthly rate and usually rolled up rather than paid monthly. On top there is normally a lender arrangement fee, often an exit fee on repayment, monitoring surveyor fees for each drawdown visit, plus valuation and legal costs on both sides. When you compare offers, look at the total cost to the end of the scheme rather than the headline rate, because a low rate with heavy fees can cost more overall.
What happens if the scheme is not sold when the loan ends?▼
That is what development exit finance is for. Once the build is complete, or close to it, you can refinance onto a cheaper short-term facility that repays the development lender and buys you time to sell at full value rather than at a discount. If the plan is to keep the units and let them, the exit is usually a refinance onto a term loan or investment mortgage instead. Either way, lenders want to see a credible exit before they lend, not after.
Is development finance FCA regulated?▼
Development finance provided to limited companies and LLPs for commercial development schemes is generally unregulated lending, outside the FCA’s regulated mortgage regime. Some lending to individuals secured on a home they live in or will live in can be regulated, which is not something we deal with. CapExpand introduces UK limited companies and LLPs on a non-regulated basis and is not an FCA-authorised firm.
Does CapExpand lend the money?▼
No. We are not a lender. We introduce UK limited companies and LLPs to a panel of development and property lenders and help you compare what comes back. The lender pays us a commission if a deal completes, never you.
Sources
- FCA, regulated mortgage contracts (MCOB)
- NACFB, commercial finance standards
- British Business Bank, business finance guidance
- Bank of England, base rate
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.
Got a scheme on the drawing board?
Tell us the site, the GDV, the build costs and your timescale, and we'll come back with the development lenders best placed to fund it. Free to use, no obligation.