How to fund property development

By Fifty21 Media

29 Nov 2022

Property development finance is the infusion of capital that is made possible via the use of development financing, a kind of short-term borrowing, is intended to facilitate the building of residential and commercial properties or the renovation of existing ones. Term loans, mortgages, and mezzanine financing are all included in this category.

How does development finance work?

Development finance works by the lender giving money to acquire the property and the money to perform the building work.

Most lenders who specialise in development financing will first provide a loan based on the acquisition price. Following that, the lender will pay for all of the work's costs, but in arrears.

Once the building work has begun, the customer is responsible for funding the initial portion of the expenditures.

The next month, the developer will send an invoice to the bank surveyor. The bank surveyor will verify that everything is accurate, and after this is done, the bank will finance the customer. This is what it means to be in arrears. This makes certain that the works are finished, the development is finished, and is now ready to be sold or refinanced.

The value of the finished property is factored into the calculation of the loan amount in development financing, which differs from regular loans. Because of this, it is possible for investors and builders to put money into projects that would otherwise be out of their price range or beyond their grasp.

How to finance a development project

You should assemble a team of experts, including an architect, structural engineer, and planning consultant, before asking for development financing. This is essential for your growth objectives and loan application credibility.

Though specific needs may vary from lender to lender, most will demand the following bare minimums:

Detailed cashflow Detailed work schedule with the building contractor Detailed development plan timetable - week by week Confirmation of planning approval with conditions that must be completed before you can begin construction, and lenders must certify that this has been met before releasing cash to the client.

How to Obtain Development Funding

Companies often use the services of a finance consultant or broker to help them through the complex and time-consuming process of applying for development financing.

The broker's job is to smooth things over and make sure the due diligence is thorough and sound enough to withstand scrutiny. Having a broker evaluate your application and make sure all the information is correct and the necessary documentation is included may save you and the lender a lot of time.

What exactly is a development financing institution?

A development finance institution (DFI) is a financial lender or funding partner that assists with building financing.

High street banks and other senior lenders will provide the bulk of the funding, less the client's initial deposit.

Some alternative lenders provide development financing in their suite of offerings. Lenders may be sorted into two groups: those who focus on general lending and those whose main expertise is development financing.

Advantages of Property Development Finance

One of the main advantages of development financing is that it makes it possible for borrowers to have access to significantly bigger quantities of money. It's the largest borrowing option in the UK right now. The initial phase of a project is typically funded by a grant or donation. The developer receives more funding as the project progresses, expands, and gets closer to completion. There are no hard limitations on the amount that may be borrowed, although the maximum amount that can be borrowed is 100% of the entire cost of construction.

The following are additional benefits of development finance:

The capacity to acquire financing for homes, plots, and developments that other lenders would deem inappropriate or unviable. This comprises decaying and abandoned structures. Rapid repayment of development financing helps keep interest rates and other borrowing costs low. This method of borrowing money is far more reasonable than other long-term options. Only the money disbursed is subject to interest charges, which again may have a favourable effect on the facility's overall operating expenses. An advantage of the project's funding being released gradually. There are no explicit restrictions on the maximum loan amount. Regardless of the overall construction cost, development funding may be granted to pay up to 100% of the expenditures if the project is judged viable.

Strictly speaking, a broker is unnecessary if you plan to apply for development financing. The consensus, however, is that this is a sound plan. Lenders underwrite each project separately because of the vastly varied nature of each one. An intermediary like a broker can make sure the terms a lender proposes are truly beneficial to you.

Latest news

1

New India branch campus on the horizon for Lancaster University Keir Starmer meets Indian PM and included Prof Simon Guy Lancaster University. Pic Simon Dawson

New India branch campus on the horizon for Lancaster University

09 Oct 2025

2

Best events and talented students complete finalists list for Lancashire Tourism Awards 2026 Best Events and Talented students on Lancashire Tourism Awards finalist list

Best events and talented students complete finalists list for Lancashire Tourism Awards 2026

09 Oct 2025

3

East Lancashire Learning Group named UK digital transformation leader in CIO 100 Awards Andrew Dewhurst with the award win

East Lancashire Learning Group named UK digital transformation leader in CIO 100 Awards

09 Oct 2025

4

PHX Training appoints new business leader in Blackpool Jason Davenport PHX Training

PHX Training appoints new business leader in Blackpool

09 Oct 2025

5

Velocity seals Airbus extension worth up to $54m Velocity Composites Has Announced Its Entry Into The Us Market

Velocity seals Airbus extension worth up to $54m

08 Oct 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

Help to grow management course
Help to grow - barriers to growth.png.png
LBV Hub Seminars
26 Sep 2025 - 16 Dec 2025

Help to grow management course

Preston Campus , Preston , PR1 2HE

09:00 - 15:00

Advantage: AI – A Workshop for Business Leaders – Oct 10th
Ai 10.10.png.png
LBV Hub Seminars
10 Oct 2025 - 10 Oct 2025

Advantage: AI – A Workshop for Business Leaders – Oct 10th

Door4 Office, Burnley Wharf, Burnley, BB11 1JG

09:00 - 12:00

Unlocking major project opportunities in the North West
Lancs-cham-logo.jpg.jpg
LBV Hub Seminars
15 Oct 2025 - 15 Oct 2025

Unlocking major project opportunities in the North West

Strathmore Hotel, Morecambe, LA4 5AP

08:00 - 10:00

The New Employee Rights Landscape: Day One Compliance Essentials
EventBrite NORi - 15th Oct 2025 Webinar.png.png
LBV Hub Webinar
15 Oct 2025 - 15 Oct 2025

The New Employee Rights Landscape: Day One Compliance Essentials

Microsoft Teams, Microsoft Teams, PR253XH

13:30 - 15:00

The Autumn Re set - pour me a wine
LBV Advert_Autumn Reset 1200 x 630px.png.png
LBV Hub Networking
16 Oct 2025 - 16 Oct 2025

The Autumn Re set - pour me a wine

The Artistry House , Preston , PR1 3JJ

17:30 - 19:30

The Business Network Central & East Lancashire
LBV Header (26).png.png
LBV Hub Networking
16 Oct 2025 - 16 Oct 2025

The Business Network Central & East Lancashire

Stanley House, Blackburn, BB2 7NP

11:30 - 14:15

October Freelancer Meet-Up
LBV Hub Networking
16 Oct 2025 - 16 Oct 2025

October Freelancer Meet-Up

Society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Women scaling up Blackpool Fylde and Wyre
LBV Hub Seminars
22 Oct 2025 - 09 Jan 2026

Women scaling up Blackpool Fylde and Wyre

The Small Business Academy, Blackpool, FY4 5JX

09:30 - 15:30

HR Essentials for pubs, bars and licensed venues
EventBrite NORi - 22nd Oct Webinar.png.png
LBV Hub Webinar
22 Oct 2025 - 22 Oct 2025

HR Essentials for pubs, bars and licensed venues

Online - Teams, Leyland, PR253XH

13:30 - 15:00

RISE - Lancashire's unique leadership programme for women
thumbnail_Emma Weston Illustration WENDY BOWERS RISE Illustrstion.jpg.jpg
LBV Hub Seminars
22 Oct 2025 - 18 Mar 2026

RISE - Lancashire's unique leadership programme for women

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:30 - 15:30

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV124 Online Graphic
Subscribe now

Weekly news bulletin