What is Development Finance?

With the property finance market in Britain on the rise once again, many are turning to development finance as a form of funding. This guide will break down what development finance is and how it can be used.

Development finance

What is property development finance?

Development finance is a form of short-term funding that provides an injection of cash to assist with the construction or refurbishment of residential and commercial properties. It’s a fairly broad category that covers term loans, mortgages and mezzanine finance.

How does development finance work?

Development finance works by the lender providing money to purchase the property and the money to complete the building work.

Most development finance lenders will offer an initial loan based on the purchase price. The lender will subsequently fund 100% of the cost of works but will be provided in arrears.

Once the construction work commences, the client must fund the first part of the costs.

The following month, the developer will provide an invoice to the bank surveyor who will make sure it is all correct and upon confirmation, the bank will then fund the client. This is what in arrears means. This ensures that the works are completed, and the development is finished and ready to be sold or refinanced.

Unlike traditional loans, development finance works by taking the value of the completed property into consideration. This enables builders and investors the opportunity to fund schemes that would usually be out of reach or budget.

How to finance a development project

When applying for development finance, you will need to bring together a professional team, this will usually entail an architect, structural engineer and planning consultant. This helps lend credibility to your loan application and will also be needed for your development plans.

Lender requirements can vary but the following are basic requirements that are needed by most lenders:

  • A detailed cashflow
  • Detailed schedule of works with the building contractor
  • Detailed timeline for development plans – week by week
  • Confirmation of planning approval with conditions that need to be satisfied before you can start the build, and lenders will need to confirm that this has been met before releasing any funds to the client.

How to get development finance

Applying for development finance can be a relatively difficult and time-consuming process, and this is why many businesses use a finance specialist or broker.

A broker’s role is to facilitate the process and ensure that due diligence is carried out, robust and can stand up to any questioning. A broker can also sense check the information and saves both you and the lender time as they will review and ensure that everything is accurate and supporting evidence is provided to ensure the application goes through smoothly.

What is a development finance institution?

A development finance institution is a lender or a funding partner that provides finance to assist with finance for construction of properties.

This includes senior lenders who will lend the majority of the money excluding the client deposit, such as high street banks.

There are also alternative lenders who provide development finance as part of a wider product remit. They can be split into two categories; lenders who specialise in providing finance or more specialist lenders, whose main forte is development finance.

How Newable Finance can help

Newable Finance’s team has supported property developers to secure building loans, mortgages and funding across a range of asset classes and geographies.

Our team of experts are on hand to secure you the best property development loans possible. We have contacts with lenders across the market to ensure we can always offer the best terms for your project.

We use our knowledge of the property development finance landscape to tailor your property development loan application for lenders to ensure you get the most competitive deal on the market.

About Newable Finance

Newable Finance helps businesses access the finance they need to:

  • Thrive
  • Expand
  • Innovate
  • Grow
  • Diversify

We are a UK finance broker dedicated to finding the right finance solutions for SMEs and property backed businesses across the UK and in every sector.

Being able to access the right funding when it is needed is a critical part of the growth journey of your business. Newable Finance can provide you with the independent perspective, whole of market reach and the depth of experience to secure the fast and flexible finance required to deliver your growth ambitions.



Newable Commercial Finance Limited trading as Newable Finance is registered in England and Wales. Registration number: 07474588. Newable Commercial Finance is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register www.fca.org.uk/register FRN 723703 | Data Protection number: Z6663758. Newable Commercial Finance is a finance broker, not a lender. Not all products offered by Newable Commercial Finance are regulated.