/ Corporate funding guide
Development and project finance
Development finance is priced and structured around risk that changes week by week as a build progresses. Understanding how the money is released — and what has to be true before each release — is what keeps a scheme on programme.
Guide reviewed September 2026 · Business-Utility.com
How the money is released
An initial tranche typically funds the land or an initial acquisition, and the build cost is then drawn down in stages as work completes. A monitoring surveyor appointed by the lender inspects and signs off each stage before funds are released, so cashflow between drawdowns is the developer's responsibility.
- Day one advance against land or existing property value
- Staged build drawdowns, released in arrears against certified works
- Monitoring surveyor inspections between each stage
- Retention held until practical completion in some structures
The two ratios lenders lead with
Loan to cost measures the facility against total project cost — land, construction, professional fees and finance costs. Loan to gross development value measures it against the projected finished value. A scheme can look comfortable on one and stretched on the other, and lenders will size to whichever binds first.
How interest is charged
Interest is usually charged only on funds actually drawn, and is often rolled up and settled at exit rather than serviced monthly, because a site produces no income during construction. That has to be built into the appraisal from the start, along with the arrangement and exit fees.
- Interest on drawn balances only
- Rolled-up interest settled at exit, or serviced where income exists
- Arrangement fee at drawdown and an exit fee at repayment
- Monitoring surveyor and legal costs on both sides
The exit strategy decides the deal
Every development facility is short term, so the lender underwrites the repayment route as hard as the build. A sale-led exit is tested against realistic sales values and absorption rates; a refinance exit is tested against the rent the finished scheme can achieve and the investment terms likely to be available.
What a lender will want to see
Presenting a complete pack is the difference between indicative interest and firm terms. Incomplete appraisals are the most common reason a scheme stalls at the enquiry stage.
- Full development appraisal with costs, values and programme
- Planning consent and any conditions attached
- Fixed-price build contract or a detailed cost plan
- Track record of the developer and the professional team
- Independent valuation and a clear, evidenced exit strategy
Frequently asked questions
- What is development finance?
- It is short-term funding for a construction or refurbishment project, released in stages as work completes and repaid from a sale or refinance once the scheme is finished.
- How is it different from a commercial mortgage?
- A commercial mortgage funds a completed, income-producing property over a long term. Development finance funds the build itself over a short term, is drawn in stages and is repaid at exit.
- What is loan to cost?
- Loan to cost expresses the facility against total project cost including land, build and fees. Lenders also look at loan to gross development value, which measures the debt against the finished scheme's value.
- What is an exit strategy?
- It is how the facility gets repaid: a sale of the completed units, or a refinance onto a longer-term investment loan. Lenders test its credibility before offering terms.
Take your scheme to the funding market
Send us the appraisal, the programme and the exit. We put the requirement to our funding panel and come back with the structures, ratios and pricing available for the scheme.
Discuss a funding requirement