Development Finance Lenders

Development finance is a type of short term finance that helps developers to build on a plot of land, carry out construction work or renovate a property. The terms of the deal are structured to assist the developer with their specific project and timelines.

KP Finance has an excellent track record with development finance companies, helping you to borrow £1 million and over for light, heavy and ground up development across the UK.

We can facilitate funding in a matter of weeks. Speak to our team using the number below or enter your details and we will contact you immediately. With some information, we can provide you with an indicative quote within 24 hours.

Call +44 203 488 1128

samuel kalms

Samuel Kalms, Director

What is Development Finance and How Does It Work?

Development finance is designed specifically for the purpose of renovating, converting and constructing properties. This land or property is used as security and includes residential, commercial or mix-use properties, with the intention to increase the value and sell on for a higher price or rent out to tenants.

The loan facility is split between land costs (up to 50%) and build costs (up to 100%) and the funds are released in stages to assist the developer and their requirements.

The amount you can borrow is based on the GDV (rather than the LTV) and this stands for the Gross Development Value and what the property will be worth upon completion.

The terms of the loan are typically for a maximum of 24 months, with the loan repaid in full upon exit. 

Development finance loans are available through a range of financiers including private investors, private equity firms, banks, lending institutions, challenger banks and more.

For any questions relating to your development finance project, you can speak to our director Samuel Kalms who will be delighted to assist. 

What Can Development Finance Be Used For?

  • Residential developments
  • Mixed-use developments and HMOs
  • Commercial developments
  • Industrial developments
  • Light refurbishments
  • Heavy refurbishments
  • Ground up development
  • Purchasing land
  • Permitted development
  • Planning gain
  • Airspace developments
  • Affordable housing
  • Student accommodation
  • Hotels

What Are The Terms of Development Finance?

  • Borrow £1 million +
  • Rates from 0.44%
  • Maximum 65% gross development value
  • Loan period 3 to 24 months
  • Covers all construction and renovation costs
  • Funds released in stages
  • Covers all architectural and engineering fees
  • Residential, commercial and mixed-use properties
  • Available in UK, Scotland and Wales
  • Security at risk

What Are The Benefits of Property Development Loans?

Accessibility – Development finance gives property developers and investors the opportunity to access a lot of capital to build from a plot of land or renovate an existing property.

For those developers that might have equity tied up in other projects, but have an appetite to grow, the funding terms are favourable to help fund a large proportion of the land costs and cover building costs.

Helpful Loan Structure – The terms of a property development finance loan are structured in such a way that it covers land and sometimes all of the building costs. 

It is a purpose-built loan structure to help develop and build and give developers the chance to make healthy profit margins and complete within expected timelines.

The funds are released in stages as the project progresses. There is an initial lump sum on day one and additional funds are released upon meeting different milestones in the project.

The repayment terms are designed to be flexible, with the most popular choice to roll up interest and repay the loan in full at the end of the term or upon exit.

Speed – Development finance can be funded much quicker than typical mortgages or mainstream financial products of this size.

Applicants can often receive indicative quotes or decisions within 24 hours or a few days of applying and once approved, can receive their first round of funding in just a few weeks. This helps with pressing deadlines and trying to complete deals against competitors.

Criteria – The eligibility for development finance can be a lot more flexible than those from traditional banks and institutions.

Your track record, the potential for the property and proposed plans can have a huge influence on whether you are approved and receive the terms you are looking for. Depending on the lender, your credit score and history may not be as relevant or influential in your loan outcome.

Useful Guides

How is Development Finance Different To Bridging Finance?

What Are The Different Stages of Development Finance?

What is Development Finance?

Development Finance Loan Example

A developer has been granted planning permission to build four houses with the gross development value estimated at £5 million. The total costs involved are £3 million, made up of £1.5 million for purchasing the land and £1.5 million in build costs. A lender might agree to offer development finance of £3.75 million (limited to 75% of costs) structured as £400,000 as an initial advance followed by the remainder of the loan transferred in stages throughout the rest of the build.

 

What is The Eligibility Criteria For a Development Finance Loan?

At KP Finance, we are able to take a view on different backgrounds and we will always try to work with you to offer the best structured terms possible.

With development finance, understanding the project and opportunity is key. By having a clear indication of land and build costs, your plans and your exit strategy, this will be a huge factor that determines whether your loan will be successful.

The maximum we can lend is 65% GDV and you will need to provide a substantial deposit through your own funds, savings or investments. 

Your eligibility may include:

  • Properties in UK, Scotland and Wales
  • Must have a good track record
  • Individuals, limited companies and groups 
  • Good credit score not essential 
  • Financial records and statements
  • Proof of funds/deposit
  • Business plan with clear exit strategy
  • Proof of land purchase price and build costs

Case Studies

planning permission for airspace
Commercial Investment
Residential Investment
Hotel Investment
Residential Development
PBSA Investment
Commercial Portfolio Investment
Residential Bridge-to-Sell
who owns airspace
Residential Portfolio Investment
Mixed-Use Acquisition Bridge

Why Should I Use KP Finance As Development Finance Lenders?

KP Finance was founded in 2016, with Director Samuel Kalms drawing on more than 15 years of experience in real estate finance.

Our passion lies in facilitating the right finance and loans or our clients, from £1 million upwards. Our ability to structure deals according to your requirements is what separates us from others.

We are proud to offer a hands-on experience and can offer critical insight and advice to make sure that you get the best terms, rates and your project will be a success.

We are able to offer initial quotes and decisions within 24 hours or sooner – with a view to transfer your funds within weeks, not months.

Frequently Asked Questions

 

What Are The Rates For Development Finance?

The rates for development finance range from 0.44% to 1.35% per month based on various factors including:

  • The lender’s assessment of your risk
  • The value and condition of the security being used
  • The current market conditions
  • The developer’s experience and previous track record
  • GDV value and deposit amount

What Is The Difference Between Bridging Finance and Development Finance?

Bridging finance is used to pay for property purchases under a tight deadline, whether it is to break or avoid property chains or beat a competitor to the punch.

Development finance is structured in such a way to cover the land costs and building costs, so helping to build up the property and its construction costs is the key differential.

The amount you can borrow through bridging finance is determined through the loan-to-value (LTV) which is similar to a mortgage and will lend up to a maximum of 75%.

Development finance, by comparison, is based on Gross Development Value, which is the overall value of the property once completed and usually to a maximum of 65%.

How Are The Funds Released in Stages?

The loan is released in stages, also known as tranches or instalments.

There is a larger drawdown in the initial stage, typically to fund the land purchase, and smaller instalments distributed to pay for construction costs upon reaching different project milestones. 

Is The Loan Secured Against The Property?

Yes, the land or property that is being purchased is used as security and this could be at risk of repossession if the loan is not repaid.

Which Parts of The UK Do You Offer Development Finance? 

KP Finance proudly covers the UK, Scotland and Wales and all major cities including Aberdeen, Birmingham, Brighton, Bristol, Cardiff, Edinburgh, Exeter, Glasgow, Leeds, Leicester, Liverpool, London, Manchester, Newcastle, Norfolk, Nottingham, Sheffield and more.

What Happens if My Project Is Overrunning? 

If your project overruns beyond the loan term (maximum 24 months), you may be charged a fee and ongoing interest to extend the loan.

Some developers may opt to refinance their loan or if they need additional capital, they may consider other forms of senior debts such as mezzanine finance.