How the facility is structured
A development facility has two parts. The day-one advance funds the land or the existing building, typically at 50–70% of purchase price or value. The build tranche then funds construction in arrears, released in stages as work is completed and verified.
Because construction money is drawn as it is spent rather than in a lump sum, interest is charged only on the balance outstanding. That is why comparing headline rates without modelling the drawdown profile overstates the real cost of a development loan.
How much you can borrow
Lenders apply three tests simultaneously and lend the lowest result: a percentage of gross development value (commonly 60–70% of GDV), a percentage of total cost (commonly 80–90% of land plus build), and a minimum profit-on-cost margin, often 15–20%, so that the scheme can absorb a cost overrun or a softening market.
Total cost means everything: acquisition, stamp duty, professional fees, build contract, contingency, finance costs and sale costs. Schemes fail underwriting far more often on an understated cost plan than on an ambitious end value.
Drawdowns and the monitoring surveyor
Once construction starts, an independent monitoring surveyor appointed by the lender inspects progress, certifies the value of work completed and confirms that costs remain within the approved plan. Each drawdown follows a certificate, usually within a few working days.
Build the surveyor's timetable into your programme. Contractors expecting payment on their own cycle, and a developer waiting on certification, is the single most common source of avoidable delay on a funded site.
Pricing and fees
Expect an arrangement fee, an exit fee calculated on either loan or GDV, monitoring surveyor costs, legal fees on both sides and a valuation. Interest is usually rolled up and settled at redemption rather than serviced monthly, which preserves cash during the build but must be included in your cost plan from the outset.
Pricing varies widely by experience, scheme type and leverage. A first-time developer at high leverage on a complex site prices very differently from an established developer at 60% of cost.
Exit is underwritten on day one
Lenders underwrite the exit before they release a penny: sale of the completed units, refinance onto an investment mortgage, or a forward-funding agreement. Evidence matters — comparable sales, agency advice, pre-sales or pre-lets, and a term-sheet from a term lender if you intend to hold.
Where a sale programme runs long, a development exit facility can refinance the development loan at a lower rate while units are marketed, which is often cheaper than extending the original facility.
What to prepare
A full appraisal with cost plan and cash-flow, planning consent and drawings, the build contract and contractor track record, a schedule of professional team appointments, your own development CV, and a clear statement of equity going in and where it comes from. Global Funding Gateway packages this into a form lenders can underwrite and approaches funders active in your jurisdiction and scheme size, with no upfront fees.
Frequently asked questions
How much deposit do I need for development finance?
Typically 10–20% of total scheme cost as cash equity, though land already owned at below current value can count toward it. Lenders want your capital committed before theirs is drawn.
Can a first-time developer get development finance?
Yes, at lower leverage and higher pricing, and usually only with an experienced contractor and professional team appointed. Some lenders will require a project manager with a relevant track record.
How long does development finance take to arrange?
Six to twelve weeks is realistic from full application to first drawdown, driven by valuation, monitoring surveyor appointment and legal work rather than credit appetite.
Last reviewed: 2026-08-15