Property finance
Development Finance for UK Limited Companies
Development finance is short-to-medium-term funding for building new property, converting an existing building to a new use, or carrying out major structural work. Unlike a mortgage, the money is usually released in stages as the work progresses, and the loan is repaid when the finished property is sold or refinanced.
This guide explains how development finance generally works for limited companies, what lenders look at, and what to check.
Wize Finance can help your limited company see whether development finance, or another type of finance, may suit your project.
Share the site, the scheme and the build costs as you have them. The team reviews your enquiry and discusses how the project might be funded.
This guide is for companies developing property to sell or let. It doesn’t cover building or renovating your own home.
How development finance works
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Stage 1: Site
- At the stage gate
- Surveyor checks
- Then
- Next funds released
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Stage 2: Foundations
- At the stage gate
- Surveyor checks
- Then
- Next funds released
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Stage 3: Structure
- At the stage gate
- Surveyor checks
- Then
- Next funds released
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Stage 4: Fit-out
- At the stage gate
- Surveyor checks
- Then
- Next funds released
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Stage 5: Complete
- At the end
- Exit
- Then
- Sell or refinance
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The plan comes first.
The lender looks at the site, the planning position, the build costs, the timetable and the expected value of the finished property.
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Land or building purchase.
Some facilities include money towards buying the site or building. Others start once the company already owns it.
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Money is released in stages.
As each stage of work is completed, an independent surveyor (often called a monitoring surveyor) checks progress before the next stage of funds is released.
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Interest is often rolled up.
Many development loans add the interest to the balance instead of collecting it monthly, because the project isn’t earning income during the build.
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The exit.
When the work is finished, the loan is repaid by selling the property, or by refinancing onto longer-term finance if the company keeps it to let.
What development finance is used for
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Ground-up development. Building new homes or commercial property on a site, from foundations to completion.
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Conversions. Changing a building’s use, for example offices to flats or a barn to homes, usually with planning permission.
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Major structural work. Substantial reworking of an existing building, such as structural alterations or extensions that change what it is.
What development lenders look at
Lenders fund the project they can see completing, and the exit they can see working.
- The project’s numbers. Build costs, contingency, and the expected value of the finished property, usually checked by the lender’s own valuer.
- Planning. Whether planning permission is in place, and any conditions attached to it.
- The team. The developer’s track record, and the experience of the contractor and professional team.
- The company’s own money. Lenders usually expect the developer to put money into the project.
- The exit. How the loan will be repaid at the end: sales, or refinancing onto long-term finance.
Planning a build or conversion?
Tell us about your project, and see which types of finance may suit it.
Costs and risks to understand
What to compare:
- The interest rate, and whether interest is rolled up, retained or paid monthly
- Arrangement and exit fees
- Monitoring surveyor, valuation and legal costs
- How and when each stage of funds is released
- What happens if the build overruns, or costs rise
- Security over the site, and any personal guarantee requested
Development finance FAQs
What is development finance?
It’s short-to-medium-term funding for building, converting or substantially reworking property, usually released in stages as the work progresses and repaid when the property is sold or refinanced.
How is development finance paid out?
Usually in stages. As each stage of work is completed, an independent surveyor checks progress, and the lender then releases the next stage of funds.
Do I need planning permission to get development finance?
Lenders usually want to see the planning position clearly. Many expect permission to be in place, or to be close to being granted, before they lend for the build.
Can a first-time developer get development finance?
Some lenders may consider developers without a track record, often for smaller projects or with an experienced team around them. Requirements vary, so it’s worth sharing your experience and the team around you when you enquire.
What’s the difference between development finance and bridging?
Bridging is usually used to buy property, or for lighter work. Development finance is designed for building, converting or major structural work, with funds released in stages.
How is development finance repaid?
Usually at the end of the project, by selling the finished property or by refinancing onto longer-term finance if the company keeps it.
How Wize Finance works
Wize Finance uses the information you give us to understand your project. Where appropriate, it introduces the business to a finance provider, which assesses the application and makes the decision.
After you submit your details, the Wize Finance team reviews your enquiry and contacts you to discuss your funding needs and next steps. Where appropriate, your details can then be shared with a suitable funding provider.
It helps to tell us: the site and its planning position, what you’re building or converting, the expected costs and timetable, and how you plan to exit.
- The business
- Wize Finance understands your project
- Finance provider assesses the application and makes the decision
Ready to talk about your development?
Tell us about your company and the project, and see which types of finance may suit it.