Side by side
| Criterion | Development finance | Bridging loan |
|---|
| Purpose | Ground-up build or major conversion | Purchase, refinance or short-term gap funding |
| Drawdown | Released in stages against build progress | Drawn in full at completion |
| Term length | Typically twelve to twenty-four months | Typically one to eighteen months |
| Monitoring | Quantity surveyor checks at each stage | Minimal, based mainly on the exit strategy |
| Speed to first drawdown | Slower, requires full project appraisal | Faster, often within days to a few weeks |
| Cost basis | Interest on drawn balance plus fees | Interest on the full amount from day one |
What each is actually built for
Development finance is structured around a build programme, with funds released against a schedule of works verified by a quantity surveyor. This staged release protects both parties, ensuring the lender only advances against completed progress and the borrower only pays interest on funds actually drawn.
A bridging loan is designed for speed rather than construction, commonly used to complete a purchase quickly, cover a chain break, or refinance while a longer-term facility is arranged. It is not typically suited to funding a build from scratch because it is advanced in full upfront.
Cost and risk profile
Development finance carries more upfront work, including detailed cost appraisals and ongoing monitoring, but this rigour protects the project and lender against cost overruns. Bridging finance is quicker to arrange but interest usually accrues on the full facility from day one, which can make it expensive if the exit takes longer than planned.
Choosing between them
If the project involves construction, use development finance structured around the build programme. If you need to move quickly on a purchase or refinance, or need to bridge a short gap before a longer-term facility completes, a bridging loan is the more natural fit.
The short answer
Use development finance for ground-up builds and major conversions with staged drawdowns, and a bridging loan for fast, short-term purchase or refinance needs.
Questions
Can a bridging loan be used to start a development?
It is possible for light refurbishment, but full ground-up development is generally better suited to a facility with staged drawdowns tied to build progress.
What is a typical exit route for a bridging loan?
Common exits include sale of the property, refinance onto a term mortgage, or completion of a related transaction that releases funds to repay the loan.
Why does development finance take longer to arrange?
Lenders need to review the build cost plan, planning consents, contractor arrangements and appoint a monitoring surveyor before releasing funds in stages.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
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