Development Finance and Funding for Developers

Development Finance is exactly what it says on the tin. This is where a lender provides finance in staged payments to help not only with the acquisition of a site, but also for the build costs to complete the scheme.

Initially the lender will consider what the property type is and will lend a maximum loan to value (LTV) of 65% usually. This is typically for schemes with an attractive return for the developer.

development finance loan amounts

What can we lend on?

We can lend against almost all property types however the more common schemes consist of the following:

  • Brownfield sites with planning permission to erect residential, commercial and industrial schemes
  • Existing buildings with permitted development right to convert into the new scheme
  • Brownfield sites that fall under the work commencement rule
  • Existing developments that require completion
  • Buildings with planning permission that require demolition of part or all the existing property and erect a new building
  • Brownfield sites and buildings without planning for acquisition only; finance for build cost will only come into play once full planning is obtained
development finance loan eligibility

How do payments work for the build costs?

Money is provided in tranches, on a monthly drawdown, following sign off from a Quantity Surveyor (QS) on completion of works.

The QS will evaluate the works that have been completed from the previous month, if all is satisfied the next tranche of funding will be made available within 48 hours.

The cost of the QS varies cases by case, based predominantly on the size of the scheme.

apply for development finance loan

Who do we lend to?

  • Any company whether it be limited entity, sole traders and partnerships (sole trade and partnerships with 3 or less partners must be for business use only)
  • JV partners entering a scheme under a newly formed Special Purpose Vehicle (SPV)
  • Private individuals – for business use only
  • Charities
  • Pension schemes – SIPP and SASS
  • Expats
  • Foreign nationals with property in the UK
development finance funding

How much does it cost and how long is the term?

The Development Finance market is increasingly competitive with new lenders entering the market all the time, from private investors to mainstream banks.

Our rates start at 3% per annum and can be for a maximum term of 5 years depending on the size of the scheme.

How do I repay?

The most typical repayment method is the sale of the properties post completion. The lender will place a debenture over the borrowing company and all proceeds from sales, be it off-plan or post completion sales will automatically go towards the repayment of the facility, the remainder will be the developer’s profit.

Interest and capital are typically rolled up until the end so no payments are required other than that for the monitoring fees of the QS during the entirety of the build. You can opt to pay the interest on a monthly basis, however this is never normally recommended.

Can I get 100% finance?

In essence yes, however you will need additional security as collateral towards the acquisition costs or be willing to entire in a Joint Venture (JV) agreement with a Lender. A JV agreement will require you to split the profit back end with the Lender, with profit always in favour of the developer.

They will also charge a rate of interest on the capital which will be deducted from the overall profits.

How long does it take before my money is available?

Funds on Development Finance facilities typically have a lead time of 4-6 weeks, however for the more complicated cases it can take up to 12 weeks. Each case is different, and it will very much depend on a number of variables.

RLA Capital have over 40 years of experience in providing specialist bridging finance facilities. This coupled with our outstanding customer services levels and extensive funder panel leaves us best placed to benefit your business in this area. Please do not hesitate to contact a member of our dedicated team to discuss further.


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