What is Development Finance?

Development finance is a type of lending that helps businesses, entrepreneurs, and property developers to access funding for development projects – both residential and commercial.  It is a more specialised form of finance which is mainly targeted towards development projects such as construction, refurbishment, and renovation. This type of funding is often used when traditional loans and other forms of financing are not available or not enough. The loan is paid in tranches as the development progresses and is typically repaid from either sales or refinance of the property.

Who Can Take Advantage Of Development Finance?

Development finance offers a valuable funding solution for property developers, businesses, and entrepreneurs seeking financial support for their development projects. This flexible financing option can be utilised for various types of projects, including new builds, conversions, refurbishments, renovations, and extensions. Whether you’re looking to fund residential or commercial property developments, development finance provides the capital needed to bring your vision to life. From funding construction projects to converting buildings into flats or offices, property development finance caters to the diverse needs of ambitious individuals, entrepreneurs, and organisations in the real estate industry.

What Types Of Projects Are Eligible For Development Finance?

Development finance can be used for a wide range of projects, from new builds, conversions, refurbishments, renovations, and extensions. Development finance is typically available for projects such as residential and commercial property developments, and leisure schemes, amongst others.

How Does Development Finance Work?

Development finance works by providing money to the borrower, usually in the form of a loan. The value of the tranches relates to the value of work completed and is typically paid after the work is completed. This money can then be used to fund a specific development project, and not for general use by the borrower. Development finance typically consists of two components, with one being for the development costs and another typically for part of the land cost. The loan can be repaid by sales or refinance of the project. 

How Much Can You Borrow For Development?

Development finance operates by providing borrowers with funds, usually in the form of a loan, which is disbursed in tranches based on the completed work. This funding is specifically designated for the development project and not intended for general use by the borrower. Typically, development finance consists of two components, one for development costs and another for a portion of the land cost. The borrowing amount for development finance is typically determined as a percentage of the end development value, known as Loan to Value (LTV). With typical loan limits ranging from 50% to 70% LTV.   Another key metric is Loan to Cost (LTC) which is the loan amount divided by the total project costs – BLG will lend typically up to 90% of the project costs (LTC). Although this can vary depending on the details of the project. To secure the loan, a first charge legal security over the development is typically required. The repayment term for development finance can vary, depending on the project and the lender. The term of the loan needs to be sufficient to allow time to commence works, complete the construction, and have time for the sales or refinance to complete.

What Is Usual Term For Development Finance?

The repayment term for development finance can vary, depending on the project and the lender. The term of the loan needs to be sufficient to allow time to commence works, complete the construction, and have time for the sales or refinance to complete.

What Are The Advantages Of Development Finance?

Development finance offers a number of benefits, such as being able to access financing for projects that traditional lenders may not fund. It also allows for flexible repayment amounts and term, meaning borrowers can choose to match the loan drawdowns to the cashflow needs of their project and thus minimise borrowing funds in excess of when it is needed.

Can You Get 100% Development Finance?

In most cases lenders require a borrower to have a proportion of the total project costs to be provided by the borrower – this could range from 5-40% of project costs. If a typical development loan is for say 70% loan to cost (LTC), then the remainder is the developer equity in the project. Many lenders allow this developer equity to be part funded by mezzanine finance. Where a lender lends more than 70% of project costs, they are beginning to take equity risk and the fees increase proportionally.  In the case of the project being 100% funded by a lender, then the lender is taking all of the equity risk. BLG will lend typically up to 90% of the project costs, although this can vary depending on the details of the project.

How Much Cash Contribution Do I Need For Development Finance?

The amount of cash contribution that is required for development finance can vary depending on the project and the lender. As mentioned above this can range from 5-40%.

What Is The Difference Between Finance And Development Finance?

The main difference between finance and development finance is that the latter is used specifically for development projects. Finance can be used for a variety of projects, from buying a car or a house to starting a business. Development finance, however, is focused solely on development projects, such as constructing a new house or renovating a business premises.

How Do You Repay A Development Finance Loan?

When the development project has completed, the borrower will typically need to repay the loan. Repayment of the loan is typically from sales of the units in a project or the refinance of the project.   During the life of the project interest owed is usually rolled up monthly and added to the loan – it is then repaid with the principal of the loan.


"A challenging site like no other with every inch of the plot being built on and 12 apartments built-out through a driveway 2.5m wide off of a main high street with limited access rights, not to mention all the complexities associated with 13 Party Wall Agreements. Most lenders would not have had the vision for the scheme or the confidence in Spiller Builders to build out the scheme.  I just wanted to say how helpful the entire BLG team have been during the build. A very approachable and knowledgeable team, with a “can do” approach to lending. We will be looking to do more business with you for sure."

“We have used BLG for development finance for over 8 years. During that time we have found their knowledge and expertise in the property development industry to be second to none. Their loan process, pragmatic and flexible approach to lending and flexibility when required has supported our business needs throughout the period and provided us with support to deliver new homes in Bristol and the surrounding areas.”

“As property developers you never know the curve balls that you may get and a project that is great on paper may prove a bit more tricky.  This happened to us on a project that BLG have funded and throughout they have supported us.  Our business likes to be collaborative and when we hit those tough moments it really felt like we were working as a team with BLG.  If you have a decent project you can get it funded, but what you really need is a business that is there to support and advise you as well.  For us on this project it was BLG.”

“I approached BLG Development finance with an opportunity I had in Chesham, Buckinghamshire, to build 5 new build houses in 2021. My main contact was Anil Bains who is a Director covering Asset Management. Within very quick timescales, BLG provided me with indicative quotes in regards the finance levels they could offer me. Having considered those levels, I requested a valuation to be carried out which again was dealt with swiftly. We proceeded to completion. The build went very smoothly with monthly monitoring being carried out by BLG and monthly drawdown requests dealt with in a very timely manner. Due to a difficult time generally in the market in regards selling, I was in need of a six-month extension to the loan which again was appraised very quickly and granted. Having dealt with numerous funders over the last 20 years, I can only speak highly of my personal experience with BLG and would very confidently work with them again on any future projects. “

"From our side it has also been a pleasure working with BLG and the team there. We have found you easy to deal with, proactive in resolving any minor issues that have arisen through the project and shown great flexibility in working with us as a partner. We will certainly like to work with you on future partners."

“I really appreciate your hard work. We really like the way you communicate & I must say I haven't seen many people who are that approachable.”

“A very efficient processing team, dealing with the DD once deal credit approved, through to completion”

“Many thanks for your efforts on this one and getting it approved and sorted so swiftly, very much appreciated. I am sure I will be speaking to your over the coming months.”

“We had other funding options, but chose to use BLG again, as we work well with the team, who always provide very clear information and advice with a friendly approach throughout the funding process. Very efficient and always very helpful.”

“Many thanks Anil, it’s been a real pleasure working with BLG so far.  We’re lining up the next project too”

“We would recommend all staff we have dealt with at BLG, as we are very satisfied with the team and the initial offer/terms presented, then you and the funding team, through to the draw down team at valuation stage.”

“All documents are clear and the way you keep clients informed, all the way along the funding process, is refreshing for us”

“With regard to what should be improved at BLG, we work with many lenders in our business and we do not get the help and response we have had on the two projects with all at BLG on our funding for our developments.”

“We would particularly mention Dave Edwards and Tom Pitts as being central to having a smooth working relationship and being positive and helpful at all times. Their guidance in helping us navigate the project from inception to completion was invaluable. As was their patience, particularly at the beginning. We look forward to many future projects with the BLG team.”

“We would like to express our appreciation for your support on our development in Bristol. We were very pleased that, from the outset, you shared our vision of the project to convert a dated but classical building, that had outlived its usefulness as a school, into unique luxury apartments with views overlooking the city. We found our dealings practical and streamlined. Monthly payments were processed in an efficient and timely manner.”

“BLG are very good at communicating with clients and all documents are very clear and all at BLG are always happy to help.”

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