Development finance lenders: loan-to-cost limits and terms compared

Choose development finance lenders by fit first and price second. A lender that does not fund your scheme size, location or level of experience will decline however good the numbers look, so check five things before you compare any rate:

• Loan size. Many development lenders publish a minimum. In the table below they run from £10,000 (Affirmative Finance) to £1 million (OakNorth Bank).
• Loan to cost and loan to GDV. The lender applies both, and the lower answer sets your loan.
• Term. The term has to cover the build and the time to sell or refinance, with room for delay.
• Experience. Some lenders accept first-time developers. Others lend only to experienced developers.
• Location and scheme type. Most lenders below lend in England and Wales, some also in Scotland, and some only in particular regions or scheme sizes.

Our guide to property development finance explains how staged drawdowns, monitoring surveyors and exit finance work. This page stays on the lenders and what they publish.

Loan to cost (LTC) is the loan as a share of the total project cost: land, build, fees and finance costs. Loan to gross development value (LTGDV) is the loan as a share of what the finished scheme should be worth. Development finance lenders work out both and lend the lower amount.

Read loan to value the same way on a bridging loan, where there is no build cost. Our page on loan to value covers that measure in more detail.

The table shows each lender’s development products in its own published words, taken from its profile in our directory of UK business lenders. Lenders are listed in alphabetical order. Where a lender has not published a figure, the table says so.

We left out lenders on our list whose development products publish no terms at all, because there is nothing to compare. A lender’s terms can change after the date shown, so check its own pages before you rely on a figure.

These notes come from each lender’s profile, which records the lender’s own published criteria.

• Affirmative Finance lends £10,000 to £3 million for residential development, says it can provide 100% of the funds needed in the right circumstances, and says it lends to developers of all kinds, including first-time developers, in England, Scotland and Wales.
• Colenko lends £300,000 to £2 million for up to 24 months on small residential schemes, at up to 90% loan to cost and 70% of GDV, for experienced developers and contractors in England and Wales. Its site is for professional intermediaries only.
• FW Capital runs regional funds. Its North East Property Fund lends £250,000 to £1 million for up to 2 years, and its commercial property fund £1 million to £7 million with repayment terms up to five years, in named North East areas only.
• Goldentree Financial Services lends £100,000 to £10 million for up to 24 months, at up to 90% loan to cost and 70% of GDV on residential schemes or 75% on commercial ones, and considers first-time developers with a viable project and professional team.
• Hampshire Trust Bank lends to experienced developers in England and Wales up to 65% of GDV, with standard terms of 12 to 36 months, and offers development exit finance up to 70% of GDV.
• Lendhub lends £500,000 to £7.5 million for 6 to 24 months, at up to 90% loan to cost and 70% of GDV, and lists part-complete developments as well as new builds. It requires full personal guarantees from directors and shareholders holding more than 25%.
• Mint Property Finance lends £75,000 to £3 million for up to 18 months, at up to 65% of GDV and up to 100% of works, on schemes of up to 4 houses or 6 flats, and accepts first-time developers.
• OakNorth Bank has a minimum loan of £1 million and structures bespoke facilities, including umbrella facilities that combine several projects.
• PMJ Capital publishes ground-up loans up to 85% of cost and 65% of GDV, and development exit loans up to £5 million. It writes unregulated loans only and does not lend in Northern Ireland.
• Sancus releases development funding in stages and refers to property finance of up to £15 million, lending in England and Wales with a first charge required.
• Signature Property Finance lends £250,000 to £3 million for up to 24 months on conversions and new build of up to 15 units, at the lower of 65% of GDV or 80% of total costs, and considers first-time developers.

Yes, some development finance lenders say they consider first-time developers, subject to status and lender criteria. In the table above, Affirmative Finance, Goldentree, Mint Property Finance and Signature Property Finance say so on their own pages. Colenko and Hampshire Trust Bank describe their development lending as for experienced developers.

A first-time developer can usually strengthen a case by bringing the experience in from elsewhere:

• An experienced main contractor on a fixed-price building contract.
• A professional team: architect, quantity surveyor and project manager.
• A smaller first scheme, within the size limits some lenders publish.
• A detailed cost plan and programme, with a contingency.
• A realistic exit, backed by local sale prices or a refinance route.

If the gap between the loan and the total cost is too large, some developers add a second layer of borrowing behind the senior loan. Our guide to mezzanine finance covers how that works and what it costs.

Development lenders take a first charge over the site in almost every case, and many also ask for personal guarantees. Lendhub, for example, publishes that it requires full personal guarantees from directors and shareholders holding more than 25%. GOV.UK guidance says a charge created by a limited company should be registered at Companies House within 21 days, or a court order is needed to register it later.

Costs vary by lender and applicant, and most lenders do not publish rates. Ask each lender for these in writing:

• The interest rate, and whether interest is serviced monthly, retained or rolled up.
• Arrangement and exit fees, and how each is calculated.
• Valuation, monitoring surveyor and legal fees, which you usually pay.
• Non-utilisation fees on money not yet drawn. Affirmative Finance, for example, states no non-utilisation fees.
• The cost of extending the term if the build or sales run late.

Tax matters too. HMRC’s VAT Notice 708 says the construction of new qualifying dwellings is generally zero-rated, while converting a non-residential building into a dwelling is generally charged at the reduced rate of 5%. The rules have conditions, and Capzy does not give tax advice.

Development finance suits a build or conversion. Other products suit other stages of a project:

• Bridging loans for buying a site or building quickly before the works start, or for light refurbishment.
• Development exit finance, which several lenders above offer, to repay a build loan once units are complete and give time to sell.
• Commercial mortgages to hold a finished building that will be let.
• A joint venture with an investor who brings equity and shares the profit.

If you build to let rather than to sell, our guide to build-to-rent development finance covers how lenders view that exit.

Capzy is a credit broker, not a lender. The lender pays us when a facility completes, so we do not charge you a fee. We describe lenders from their own published terms and we do not rank or rate them. More lender guides sit in our lenders category.

You can check your funding options with a soft search that does not affect your credit score. A lender’s full application may use a hard search, and all funding is subject to status and lender criteria. We do not give legal, tax or financial advice.