Development Finance Glossary

A term loan used to fund building projects, like new developments, renovations or property conversions.

The money is released in stages as the work progresses and is usually repaid through selling the property or refinancing it.

A secured term loan used to fund residential projects, such as housing developments, building, renovating or converting houses and apartments.

Funding used to build residential properties that are kept and rented out long term, rather than sold after completion.

A secured term loan used to fund commerical property projects, such as building, renovating or converting offices, retail units, or mixed-use developments.

A senior-secured property loan that offers higher borrowing than standard senior loans, reducing the need for extra equity or mezzanine finance.

Secondary secured funding that comes after senior debt, helping reduce the amount of equity needed for a property development.

The main loan secured against the property. It gets repaid first if the project fails.

Short term funding used to cover a temporary finance gap, like between buying land and getting a long-term development finance.

Funding from a partner instead of using your own money, often covering up to 100% of the project, with profits and interests shared.

The developer’s own money invested in a project, usually 10-40% of the total cost.

A charge on a loan for mezzanine funding which sits behind the senior loan charge. 

The total loan amount, including fees and interest.

For example, a £1,000,000 loan at 5% interest for 12 months would have a gross loan facility of £1,050,000

All the finance used in a development, including developer equity, senior loans, mezzanine finance and sometimes public funding.

A one time fee paid to the lender when the loan starts, usually a percentage of the loan, either added to repayments or paid seperately.

Funding released in stages over time, for example, part before the project starts and the rest as the work progresses.

When the interest is paid at the end from a sale or refinance rather than being paid as ongoing payments as part of your agreed repayment plan.

The expected value or selling price of a property once the development is finished.

The ratio of a loan to the property’s value.

The cost of borrowing, usually charged monthly or quarterly, expressed as an annual interest rate of the loan. 

A measure of project profitability.

It shows if the costs are covered and if the projects makes enough profit, usually aiming for 25% or more.

Extra interest charged if a borrower misses payments.

A clause where the lender or local authority gets extra money if the property’s value exceeds forecasts.

When development costs exceed the budget, sometimes requiring extra funding.

A surevyor hired by the lender to check the project’s progress and approve each stage of funding.

Rules in the UK that construction must follow.

Approvals are needed at key stages, like before work starts and when the project is finished, to ensure the property is safe to live in.

The process lenders use to assess the risk of a borrower and project before approving a loan.

The plan for repaying a loan, e.g selling the finished property, refinancing or renting it out.

The estimated market value of a property at the time of sale or refinance.

Selling a property or development before it is completed, often used to reduce risk.

A legal promise by an individual (usually the owner or director) to repay the loan if the business cannot.

Interest calculated on both the original amount and any interest already added, so the total grows faster over time. Interest is accrued and paid back typically at the end of the loan via sales of the developed units.