Industries
Construction and real estate
Property businesses need staged construction funding, term debt on completed assets and short-term bridging between the two. Capital stacks are assembled to match the project timetable rather than a single product.
Construction and real estate
- Senior development and construction facilities
- Commercial and investment mortgages
- Bridging and mezzanine layers
- Common structures
- Senior development finance, mezzanine, preferred equity, investment mortgages, bridging
- Typical facility size
- £500,000 to £75 million+ per scheme
- Indicative pricing
- Senior 7–10% p.a.; mezzanine/preferred equity 12–18% p.a.
- Security
- First legal charge over site and works, debenture, assignment of contracts
- Time to funding
- 4–10 weeks for term/bridging; 8–16 weeks for development facilities
The capital profile of a property or construction business
Property and construction businesses fund three distinct phases: land or site acquisition, staged construction cost, and either sale or long-term hold once a scheme completes. Each phase has a different risk profile and is rarely funded efficiently by a single facility spanning the whole timeline.
Timing risk compounds this. Planning delays, contractor performance and market movements between appraisal and completion all affect viability, which is why lenders build contingency and monitoring into every stage rather than relying solely on the initial appraisal.
Structures across the project lifecycle
Senior development finance is drawn in stages against certified construction progress, sized on the lower of cost and a proportion of gross development value, and repaid from unit sales or a refinance on practical completion. Where the sponsor's equity contribution is limited, mezzanine debt or preferred equity can stretch total leverage, though at materially higher cost than senior debt alone.
Once a scheme is complete and let or sold, a term investment mortgage or owner-occupied facility replaces the development loan, typically at a lower margin reflecting the reduced risk of a stabilised, income-producing asset. Bridging finance fills short, time-critical gaps — an auction purchase, a lease renewal ahead of refinance, or a sale that has slipped.
What lenders scrutinise in property and construction
For development lending, the principal focus is the appraisal itself: build cost against an independent quantity surveyor's assessment, sales or rental assumptions against comparable evidence, and the experience and financial standing of both the developer and the main contractor. Planning status and the robustness of any conditions attached to consent are checked in detail.
For investment lending, tenant covenant strength, lease length and rental cover drive both leverage and pricing. Across both, lenders monitor drawdowns against independent certification and will pause funding if cost overruns or delays exceed agreed tolerances.
Common reasons property finance applications stall
Appraisals that understate build cost contingency or overstate exit values are the most frequent source of delay, since lenders' own quantity surveyor and valuer will independently test both figures. A second common issue is approaching lenders before planning consent is finalised, or with conditions unresolved, when the intended facility requires detailed consent.
Applications for first-time developers also stall where an experienced contractor and monitoring surveyor have not yet been appointed, since most senior lenders require both before committing.
How GFG structures property and construction funding
GFG reviews the appraisal, planning position and professional team before approaching lenders, addressing gaps that would otherwise surface during underwriting. Facilities are structured to match the project timetable — senior debt, mezzanine or preferred equity, and the eventual term or bridge exit — rather than sought as a single undifferentiated request.
For developers without a long track record, GFG identifies lenders willing to work with a strong contractor and monitoring arrangement in place of an extensive completed-scheme history.
Do you fund first-time developers?
Yes, at lower leverage and usually with an experienced contractor and monitoring surveyor in place.
What loan-to-cost is typically achievable for a development scheme?
Senior development finance commonly reaches 60–70 per cent of total cost, with mezzanine or preferred equity able to stretch total leverage to 80–90 per cent of cost in appropriate cases. The exact level depends on the developer's track record, pre-sales or pre-lets achieved, and the strength of the appraisal.
Can a scheme be refinanced from development debt to a term loan automatically?
Some construction-to-term facilities include an automatic conversion mechanism subject to practical completion and letting or sales tests being met. Where no such mechanism exists, refinancing is arranged as a separate transaction once the asset is stabilised, ideally initiated before the development facility matures.
Is bridging finance suitable for a below-market or auction purchase?
Yes, bridging finance is commonly used for time-critical acquisitions where completion timescales are too short for a conventional mortgage, with an agreed exit through sale, letting or refinance. Pricing reflects the speed and flexibility rather than being comparable with term debt.
How important are pre-sales or pre-lets to securing development finance?
They materially improve terms by de-risking the exit for the lender, and some lenders set minimum pre-sale or pre-let thresholds before releasing later drawdowns. Schemes without pre-sales can still be funded, generally at lower leverage and closer monitoring.
Can overseas developers and investors access UK or EU construction finance?
In most markets yes, subject to an acceptable corporate or trust structure, know-your-customer requirements and, in some cases, a local guarantor or asset manager. Structuring for cross-border sponsors typically takes longer than for domestic borrowers due to additional diligence.