Development finance isn’t automatically available to everyone, but it’s accessible to a much broader range of borrowers than many people assume. Having property development or investment experience helps, particularly on larger or more complex projects, but it’s not the only factor that determines whether a case is fundable.
Lenders assess the overall strength of the development proposal rather than focusing on a single criterion. Lenders will consider the borrower, the project, the professional team, the available equity, and the planned exit. Experienced developers, first-time developers, property investors, landowners, limited companies and overseas borrowers may all be considered where the application is credible and the development is commercially viable.
The important distinction is that eligibility for development finance isn’t determined solely by who the borrower is. It’s determined by how well the project stands up to scrutiny.
In Short
- Experienced developers can qualify for development finance.
- First-time developers can qualify for development finance.
- Property investors and landowners may also be eligible.
- Eligibility depends on the overall strength of the proposal rather than any single factor.
- Lenders assess the borrower, project, professional team and exit strategy together.
Who Can Apply for Development Finance?
Development finance is available to a wide range of borrowers in the UK. Experienced property developers remain the most straightforward applicants because they can demonstrate a track record of completing similar schemes. Lenders can assess previous projects, delivery history and exits, which helps reduce uncertainty.
That said, development finance isn’t reserved exclusively for experienced developers. Property investors moving into development, landowners seeking to realise value from a site, and first-time developers may also be considered. Many lenders are willing to assess applications from borrowers without a development track record where the project is relatively straightforward and supported by experienced contractors and consultants.
Funding can be arranged through limited companies, Special Purpose Vehicles (SPVs), partnerships and, in some cases, individual borrowers. UK residents have the widest lender choice, but expatriate and overseas applicants also have access to parts of the market, provided the proposal meets lender requirements.
Being able to apply is only the starting point. Approval depends on the strength of the overall proposal.
What Do Development Finance Lenders Assess?
One of the most common misconceptions is that development lenders assess the borrower and the project separately. In reality, they assess both together.
A developer with limited experience may still secure funding if the scheme is straightforward, the team is strong and the exit is well evidenced. Equally, an experienced developer can struggle to secure terms for a project with unrealistic costs or an unconvincing repayment strategy.
Most lenders will assess three broad areas:
Borrower
- Relevant development, construction or property experience
- Credit history and financial conduct
- Source of deposit and equity contribution
- Capacity to absorb delays, cost overruns or unexpected costs
Project
- Planning permission and planning conditions
- Construction budget and contingency allowance
- Gross Development Value (GDV)
- Overall project viability
Delivery and Exit
- Contractor, quantity surveyor and wider professional team
- Proposed exit through sale or refinance
- Evidence supporting the proposed repayment strategy
Lenders usually spend as much time assessing the route to repayment as they do the project itself. A well-located site with planning permission and an experienced contractor can still raise concerns if there is no credible exit strategy.
A developer building four houses in an established residential location, supported by sensible build costs and comparable evidence, presents a relatively straightforward project. A first-time developer attempting a complex mixed-use conversion with ambitious GDV assumptions and no proven contractor is a very different proposition.
The overall risk profile of the project is the primary factor considered by the the lender, not just the experience (or lack thereof) of the borrower.
Can First-Time Developers Get Development Finance?
Yes. First-time developers can obtain development finance, although there are fewer choices of lenders compared to lenders willing to lend to experienced developers.
Most lenders understand that every developer has to complete a first project at some point. The question isn’t whether the borrower has undertaken a development before. It’s whether the proposal gives the lender confidence that the project can be delivered successfully.
A first-time developer can strengthen an application by presenting a realistic scheme with sensible costs and values, appointing experienced contractors and consultants, and demonstrating transferable experience from construction, property investment, project management or a related profession.
The equity contribution is also important as a borrower contributing meaningful capital to the project is viewed differently from one relying on maximum leverage with little capacity to absorb unexpected costs.
Project selection is also often a deciding factor. A straightforward conversion or small residential development is generally easier to fund than a large phased scheme involving significant planning, construction and sales risk.
First-time developers are more likely to gain lender support when they work with an experienced professional team. A credible contractor, architect, quantity surveyor and planning consultant can significantly strengthen an application because lenders take comfort from proven expertise around the project.
We explore this topic in greater detail in our Development Finance for First-Time Developers page, which explains how new developers can improve their chances of securing funding.
Why Are Some Development Finance Applications Declined?
There are very few issues that create an automatic decline on their own. More often, it’s a combination of factors that causes concern for lenders. Applications can become difficult where there is insufficient equity, an unclear source of funds, adverse credit that remains unexplained, or unrealistic assumptions around costs and values. Lenders will also scrutinise schemes where contingency allowances appear too low for the complexity of the project.
Planning issues can create further challenges. A site without planning permission may still attract interest from certain lenders, but the funding options are usually different from those available for a fully consented scheme.
The same principle applies to experience. Although a lack of development experience doesn’t automatically prevent borrowing, a lack of experience combined with a complex project, an inexperienced contractor and an aggressive GDV assumption presents a much higher risk profile.
Exit strategy is another area that receives significant scrutiny. A development expected to be repaid through unit sales needs evidence that those sales are achievable within a realistic timeframe. A project intended for refinance requires credible assumptions around completed values, rental income and long-term lending availability. Projects with an unclear or poorly evidenced exit often face greater challenges during underwriting because repayment is ultimately what lenders are funding towards.
Can a Broker Improve My Chances?
A specialist development finance broker can help assess whether a project is likely to meet lender criteria and identify the lenders whose appetite best matches the proposal.
Sometimes the solution is a lender with greater appetite for first-time developers. In other cases, it may involve reducing leverage, introducing additional equity, strengthening the professional team, revising the project structure or considering a phased development approach.
There are also situations where supplementary capital, joint-venture funding or alternative financing structures may improve the overall proposition.
What even the best brokers can’t do is make an unviable scheme viable. If the costs don’t stack up, the contingency is inadequate, or the exit strategy doesn’t withstand scrutiny, changing lender or broker is unlikely to solve the underlying issue. The strongest outcomes usually come from identifying concerns early and addressing them before the application reaches underwriting.
How to Find Out Whether You Are Eligible
An initial assessment can often be carried out with a relatively small amount of information. Most lenders or brokers will want to understand:
- The location and nature of the project
- The purchase price or current site value
- Planning status
- Estimated build costs and contingency
- Projected GDV
- The borrowing requirement
- Relevant development or property experience
- Available equity contribution
- Proposed exit strategy
If you’re unsure whether a project is likely to qualify, a preliminary review can normally identify the strengths of the proposal, potential concerns and the areas that may require further work before approaching lenders. If your project appears suitable, our Development Finance Calculator can help estimate borrowing levels before a full assessment is carried out.
Do You Need Previous Experience to Get Development Finance?
No. Previous development experience is helpful, but it isn’t always a requirement. Many lenders will consider first-time developers where the project is appropriately sized and supported by an experienced professional team. Factors such as the quality of the scheme, available equity, construction budget, planning status and exit strategy can carry as much weight as direct development experience. Relevant backgrounds in property investment, construction or project management may also strengthen an application.
Can Development Finance Be Obtained Through a New SPV?
Yes. Many development projects are funded through newly incorporated Special Purpose Vehicles (SPVs). Lenders generally place greater emphasis on the experience, financial position and track record of the directors behind the company than the age of the SPV itself. A newly formed SPV isn’t usually a problem, provided the project and borrower profile meet the lender’s requirements and the proposed structure is suitable for the development.
Can Someone With Adverse Credit Get Development Finance?
Possibly. Adverse credit doesn’t automatically prevent a borrower from securing development finance, but it will affect lender choice and underwriting. The severity, age and circumstances of the credit issue all matter. A historic issue that has been fully resolved will be viewed differently from recent arrears, defaults or unsatisfied judgements. The overall strength of the project, available equity contribution and the borrower’s wider financial position remain important considerations.
Can Overseas Borrowers Get UK Development Finance?
Yes, although the number of available lenders is usually lower than it is for UK-based borrowers. Overseas applicants are often subject to additional due diligence requirements and may need to contribute higher levels of equity. The project’s viability, the professional team involved and the proposed exit strategy tend to carry significant weight when lenders assess overseas development finance applications. A strong UK-based team and clearly evidenced funding source can often improve available options.
