Development Finance

Reliable finance is a crucial part of any successful development project, and bridging lenders offer a wide variety of attractive products in this sector.


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Bringing a development project from planning to execution is one of the toughest tasks modern developers face. Finding opportunities for development and putting plans in place is only the start; ensuring that a project is escalated according to schedule and fully financed throughout is a long journey, and one that requires careful planning and the right financial backing. As all developers know, it’s important to put the right foundations in place before a project gets under way, and the most crucial thing to get right is a project’s funding. There’s little else that can stop a project being brought to completion on time, and unstable finances can cause no end of difficulties for property developers.

In this article we discuss why bridging loans are such an important part of development finance, and what makes them uniquely suited to the property development environment. It’s important to mention that this sort of finance should only be sought under the advice of a professional, so anyone considering a bridging loan as a source of funding should consult their financial advisor first.

The Requirements of Development Finance

Although property development can vary widely depending on the individual project, there are certain aspects that they all have in common. Before discussing why bridging finance is so well-suited to property development, it’s important to understand precisely what the needs of property developers are. Firstly, a property developer’s job requires a high degree of leverage: a standard development project can easily cost many millions of pounds, and a developer who’s expanding their portfolio is unlikely to be able to finance that themselves. In fact, they’re likely to need a significant portion of the project’s budget to be financed by outside investors, and in many cases banks are reluctant to stump up the sort of LTV that’s necessary. 

As well as needing a large amount of money, property developers will also often need a flexible and stable lending structure. The constraints of financing a development project usually mean that a developer has little in the way of capital on hand, which consequently means they’re keen to keep running costs down. With a standard loan, the cost of financing interest payments throughout the duration of the loan places a heavy burden on the developer’s bottom line, but bridging lenders are much more flexible.

Finally, a property developer might often need funds in a hurry. A development project may need to be jump-started as quickly as possible, and when every day counts it’s difficult to rely on the lengthy application process common to most high street banks. Being able to move quickly and adapt to changing circumstances is a must for many property developers, so an agile form of finance is necessary.

Bridging Loans for Property Development Finance

The needs that property developers have are met perfectly by bridging loans, and this explains why bridging lenders and property developers often have very close links. Because bridging lenders are often smaller, more boutique outfits, they are able to develop bespoke lending packages that exactly mirror the needs of their clients. In many cases, bridging lenders are in full control of the capital they’re lending out (known as a “principal lender”), which means they have little in the way of red tape to cut through. In addition, bridging lenders are commonly made up of a few dozen experienced professional lenders, which means decisions can be made quickly and firmly, in contrast to the lengthy response times of large general-use banks. A firm decision in principle is usually available from a bridging lender in just a few days, with funds available for draw-down shortly afterwards.

The flexibility of bridging lenders allows their clients to access very useful lending options. One of the most common differences between a development bridging loan and a more traditional loan is the option to “roll up” all of the loan costs. This allows the borrower to defer all interest payments until the end of the loan, and although this often ends up costing more in the long run it means that the borrower isn’t responsible for keeping up with interest payments while work is ongoing. Because this allows the borrower to focus on their project and frees up space in their cash flow, this makes developing a large-scale property project a much easier task.

For many property developers, the thought of a financier pulling out mid-way through the project is enough to give them nightmares. With large high-street banks keen to protect their bottom lines and wary of anything that remotely resembles a risk this remains a distinct possibility. However, bridging lenders are always experienced professionals with a keen eye for the potential of any project. Because bridging lenders can judge a project on its own merits rather than subjecting it to a “check-box” criteria, they are able to ensure a stable supply of funds that developers can rely on throughout a project’s escalation. In addition to this, many bridging lenders have access to very large investment funds, and with loans from some lenders reaching into the hundreds of millions, there is little likelihood that a developer’s lender will over-extend themselves.

Securing Development Finance

Arranging a bridging loan for development finance is a fast and streamlined process, but a critical aspect of this is the valuation and securitisation of the loan. Because bridging loans are secured against the borrower’s assets, the lender will need to conduct a thorough examination of the property before approving the loan. They will also be able to repossess and sell the assets if the borrower fails to keep up with their repayments, and since the most common form of security is the development project itself, this can lead to unwise developers losing control of their project.

Although most bridging loans are secured against the new developments, it is possible for borrowers to use existing property as security, though as these properties are often under a mortgage they may only offer a second charge. Second charge securities are usually more expensive, as they make it harder for the lender to reclaim their money, but this can be a valuable option for fast-growing property developers.

Common Uses Of Development Finance

  • Overview

    Reliable finance is a crucial part of any successful development project, and bridging lenders offer a wide variety of attractive products in this sector.

  • Barn Conversion Finance

    Barn conversions can result in amazing properties, but require a lot of work. Specialist lenders provide vital financial backing to keep these projects on track

  • Construction Finance

    Successful completion of a property development project relies on a strong, stable source of finance from start to finish, which construction finance provides.

  • Conversion Finance

    Conversions come in all shapes and sizes, and conversion finance lenders provide the flexibility and adaptability that developers need in conversion projects.

  • Development Exit Finance

    Development exit finance enables property developers to react flexibly to changing situations, and to restructure their financial commitments to maximise profits

  • Inexperienced Developer Finance

    Inexperienced developers may well have access to lucrative opportunities, and the flexible approach of development lenders enables them to take on projects

  • Land Acquisition Finance

    Successful property development requires stable funding from the very start, and land acquisition loans are an important element of any construction project

  • Mezzanine Finance

    Mezzanine finance is an important ingredient in property development, and it enables developers to take on opportunities they’d otherwise struggle to fund

  • New Build Development Finance

    New-build projects need stable funding from start to finish, and new build development finance lenders provide the tools property developers need in this sector

  • Pre-Construction Finance

    There’s plenty of work to do before construction starts, and the costs of paving the way for a successful project must be met with pre-construction finance.

  • Property Development Finance

    Property development requires specialised financial solutions, and the UK’s development finance sector provides a variety of highly flexible funding options

  • Retail Conversion Loans

    Retail conversions can be lucrative opportunities, but developers must ensure they have appropriate funding to secure planning permissions and carry out work

  • Refurbishment Finance

    Refurbishment finance lenders provide the tools that property developers need to quickly seize and escalate renovation projects from beginning to completion

  • Self-Build Finance

    Self-build projects require a specialist touch, and there are many development lenders dedicated to providing self-build finance for precisely this purpose.

  • Site Acquisition Finance

    Moving quickly is vital for successful property development, and site acquisition finance is an indispensable part of any development finance package.

  • Unmortgageable Property Finance

    Unmortgageable property finance allow property developers to take out flexible finance solutions to refurbish and renovate properties for mortgage or resale

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