Funding property development can be difficult and costly so finding the right provider who offers you the right loan product is essential.
There are a variety of lenders who offer a range of products that cater for different types of developments and their uses as well as offering loans based on your development experience and financial standing.
We have looked at what some of the leading property development finance lenders are offering so you can see which lenders offer products that might suit your needs.
The table below gives a quick comparison of the top UK providers for property development finance.
| Company | Min loan amount | Max loan to value | Max Term |
|---|---|---|---|
| Lombard Business Loans | Not stated | 80% | Not stated |
| West One Loans | £1 million | 70% | 24 months |
| Nucleus | £25,000 | Not stated | 7 years |
| Aldermore Bank | £500,000 | 85% | 24 months |
| Shawbrook Bank | £2.5 million | 80% | Not stated |
| LendInvest | £200,000 | 70% | 24 months |
| United Trust Bank | £500,000 | 60% | 18 months |
| Octopus Property | £50,000 | 85% | 30 months |
| Masthaven Bank | £100,000 | 60% | 18 months |
| Fortwell Capital | £5 million | 80% | Not stated |
| Oblix Capital | £200,000 | 70% | 24 months |
| Hunter Finance | £100,000 | 60% | 18 months |
| Cynergy Bank | Not stated | 70% | 24 months |
* The facts and figures included here come from each company’s website and were accurate at the time of writing but may have since changed. Also, please keep in mind these may not be apples to apples comparisons as each provider offers different solutions. This guide should be used as a starting off point for more research on your part.
Below we profile each of the companies’ services and features in a bit more detail.
Topics
1. Lombard Funding
Some of the features and benefits of Lombard Funding’s property developer finance.
- Will advise and structure a package to suit you
- Suitable for single properties to multi-unit schemes
- They will get to know your business before recommending a package
- Provide a range of funding
- Maximum loan value up to 80% of the property value
- Can use a broad portfolio of properties as security
- The scale and scope of the development can guide the finance options
- Funding includes equity, joint venture and bridge finance
- Suitable for light development, heavy renovation and ground-up development
- A specialist provider with experience
Lombard Funding is a specialist financial services provider that offers bridging loans, development finance and other property finance designed for developers. They provide a range of financial products for developers which include senior debt, stretched senior, mezzanine debt, equity, joint venture and bridge finance.
Lombard Funding’s property development finance is a tailored solution where they listen to your needs and examine your plans to offer you the best package for your circumstances. They provide finance for properties that can be a single property or multi-unit developments. They offer funding up to 80% of the property value but they may consider a broader portfolio of properties as security.
2. West One Loans
Some of the features and benefits of West One Loans’ property developer finance.
- Designed for smaller developers
- Loans from £1 million to £7.5 million
- Offers initial loan values up to 70% of the property value
- Can fund up to 100% of the build costs
- Terms of up to 24 months
- Will fund up to 30 units at a maximum of £1.5 million per unit
- Suitable for residential and mixed-use developers
- Will lend to sole traders, limited companies and LLPs
- Lenders must have completed at least 2 similar projects
- Must have no CCJs or missed payments
- Available for properties in England and Wales
West One Loans offers loans to the property development industry that caters for smaller developers that have some experience in developing. To be eligible for a loan you must have completed 2 or more similar projects. Their loans can be used for residential and mixed-use properties in England and Wales.
West One Loans’ will fund small scale projects up to those with 30 units valued up to £1.5 million. They offer loans that will fund up to 100% of the build costs but cap the loan at 80% of the property value. Loans are available from £1 million to £7.5 million over a period up to 24 months.
3. Nucleus
Some of the features and benefits of Nucleus’ property developer finance.
- Secured property finance loans
- Available against residential and commercial properties
- Loans from £25,000 to £20 million
- Terms up to 7 years
- Can use a property portfolio as collateral
- Competitive rates
- Will consider adverse credit
- May finance businesses that do not meet the standard lending criteria
- Available to business start-ups
- The process can take 2-3 weeks
Nucleus is a specialist business finance provider whose loan products include property finance as a secured loan against the property. They offer loans on residential or commercial properties and can even use a portfolio of properties as collateral. To be eligible you must have full business accounts, or a cash flow forecast and business plan if you are a start-up.
Nucleus offers competitive rates on their loans that are available for periods of up to 7 years for businesses in England and Wales. They offer loans from £25,000 up to £20 million. They will consider businesses who do not fit the usual lending criteria and those with adverse credit.
4. Aldermore Bank
Some of the features and benefits of Aldermore Bank’s property developer finance.
- Designed for experienced developers and house builders
- Can be used for new builds, redevelopment, conversions and refurbishment
- Suitable for mixed-use and student accommodation
- Fast turnaround in as little as 24 hours
- Loans up to 85% of the property value
- Flexible loan terms
- Loans start at £500,000 up to £25 million
- Terms up to 24 months
- Interest rates are set for each loan
- Market leading timescales for releasing funds
- Available in England, Wales and parts of Scotland
Aldermore Bank is a specialist lender and savings bank that offers a range of business loans and lending products that includes property development finance. They state that their property development finance is designed for experienced developers and house builders that can be used for new builds, redevelopment, conversions and refurbishment including mixed-use and student accommodation.
Aldermore Bank claims that they offer a fast turnaround on their loans that are market leading. Their loans are available for properties in England, Wales and parts of Scotland for up to 85% of the property value. Loans are from £500,000 to £25 million on terms up to 24 months.
5. Shawbrook Bank
Some of the features and benefits of Shawbrook Bank’s property developer finance.
- Caters for established developers
- Suitable for residential and mixed-use schemes
- Available for refurbishments and new build
- Minimum loan is £2.5 million
- Maximum loan is £25 million
- Individual property value between £150,000 to £1.5 million
- Loan value up to 80% of the property value
- They will lend part of the purchase cost and 100% of the build costs
- Fund up to 65% of the gross development value
- Will consider loans outside of these parameters on a case by case basis
- Experienced team to support you
Shawbrook Bank is a specialist savings and lending bank that offers a range of business products including property development finance that state they deliver with their own unique approach. They have catered their property development products to established developers for residential, mixed-use and new build schemes.
Shawbrook Bank’s property development finance products are a commercial mortgage that lends from £2.5 million to £25 million. They offer up to 80% of the property value or 65% of the gross development value. They limit the individual property value to between £150,000 to £1.5 million although they will consider high values.
6. LendInvest
Some of the features and benefits of LendInvest’s property developer finance.
- Products catering for refurbishment, development and development exit
- Suited to residential and semi-commercial developments
- Loans up to 70% of the property value
- Minimum loans of £200,000
- Maximum loans of £15 million
- Terms up to 24 months
- Restricted to freehold properties or leaseholds with more than 60 years
- First charge securities required
- Terms vary depending on the product and purpose
- Available for properties in England, Wales and Scotland
LendInvest claims to be the UK’s leading online property finance marketplace which offers a range of financial lending products to property developers. They offer three lending products tailored to the different needs of developers, these are refurbishment, development and development exit.
LendInvest offers finance that is available for developments in England, Wales and Scotland that are residential and semi-commercial. Each of the products has different loan terms and parameters but the development product offers the greatest loan terms of up to 70% of the property value for up to 24 months. Some of the products will require first charge security.
7. United Trust Bank
Some of the features and benefits of United Trust Bank’s property developer finance.
- Specialist development finance provider
- Competitive funding
- Flexible terms
- Offers support a wide range of developments including residential and commercial
- Loans from £500,000 to £20 million
- Maximum loan value of 60% of the gross development value
- Terms up to 18 months
- Requires borrowers to have the expertise and financial standing
- Tailored packages
- Knowledgeable in the development sector
- Claims to offer first class support
United Trust Bank is an established specialist provider of development finance that uses its experience in the sector to help fund development opportunities with experienced developers who have a good financial standing. They offer flexible and tailored packages that they claim are competitive.
United Trust Bank’s property development finance is available for developments that are residential, commercial, mixed-use, conversions and refurbishments, and they also include those requiring planning gain and sales period funding. Their loans start at £500,000 up to £20 million with a maximum gross development value of 60% being financed on terms up to 18 months.
8. Octopus Property
Some of the features and benefits of Octopus Property’s property developer finance.
- Offers loans on smaller developments as well as larger developments
- Will lend against a wide variety of developments
- Includes a variety of property tenancy types
- Maximum loan value of 85%
- Terms up to 30 months
- Offers different terms depending on the development type
- Loans include bridging loans
- Minimum loans from £50,000
- Arrangement fees apply
- Exit and early repayment fees apply on some products
Octopus Property is a specialist finance provider catering for property developers and investors who they offer a wide range of loans to for development projects. They offer four types of packages – light development, senior development, stretched senior and development exit. Properties can be commercial or residential including houses of multiple occupation, hotels, student accommodation, and holiday lets.
Octopus Property provides finance for residential and commercial opportunities with products that include loans for bridging, buy-to-let, refurbishment, development and auction. Each of these products offers different loan terms but the maximum loan value is 85% with a minimum loan value of £50,000 and a maximum loan term of 30 months.
9. Masthaven Bank
Some of the features and benefits of Masthaven Bank’s property developer finance.
- Flexible property development finance suitable for a wide variety of development projects
- Fast and flexible approach
- A simple and fuss-free application process
- Offers light development and development finance products
- Loans of up to 60% of the purchase price
- Terms up to 18 months
- Loans from £100,000 to £2 million
- Bespoke lending solutions
- Available for properties in England and Wales but will consider Scottish properties
- Access to experienced decision makers
Masthaven Bank is a specialist savings and lending provider that offers dedicated property development finance products. They provide finance to a wide variety of developments including new builds, self-build projects, refurbishments and conversions from commercial to residential.
Masthaven Bank offers two packages that can be tailored to your needs which are light development and development finance. Each of these packages has different loan terms which offer a maximum loan value of up to 60% of the purchase price or gross development value and up to 100% funding of the build costs in arrears. Loans are available from £100,000 up to £2 million on terms up to 18 months.
10. Fortwell Capital
Some of the features and benefits of Fortwell Capital’s property developer finance.
- Specialises in high loan to value development finance
- Suitable for residential and commercial developments
- Caters for established developers and investors
- Maximum loan value of 80%
- Minimum loans from £5 million up to £100 million
- Will fund private residential and alternative residential opportunities
- Offers senior or stretched loans on a first charge basis
- Also offers mezzanine loans on a second charge basis
- Suitable for new builds, refurbishment and permitted developments
- Focuses on developments in London, South East and established regional centres
Fortwell Capital is a short to medium term financial lender that caters its products to developers and investors in the UK property market. Their key focus is London, South East, London commuter towns and established regional centres in the UK. They offer high loan value development finance and only lend to established developers and investors.
Fortwell Capital’s development finance package offers loans of £5-100 million to development projects that can be residential or commercial. They fund projects that are new builds, refurbishments and permitted developments. They offer three types of funding, senior and stretched on a first charge basis and mezzanine loans on a second charge basis.
11. Oblix Capital
Some of the features and benefits of Oblix Capital’s property developer finance.
- Offers light development and development finance
- Available to residential, semi-commercial and commercial developments
- Suitable for new builds, developments, conversions and restructuring
- Funding up to 70% of the gross development value
- Terms up to 24 months
- Loans from £200,000 up to £10 million
- Will consider loans outside their guidelines
- Exit fees can apply
- Offered to individuals, partnerships and limited companies
- Available on properties in England and Wales
Oblix Capital is a specialist property finance lender who provides development finance and bridging loans. They offer funding to light development and development finance opportunities. Their light development product provides loans on residential opportunities and the development finance product provides loans for residential, semi-commercial and commercial developments.
Oblix Capital’s property development finance products vary but they offer developers and investors funding from £200,000 up to £10 million on terms up to 24 months with a maximum loan value of 70% of the gross development value. Their loans are available to individuals, partnerships and limited companies for properties in England and Wales.
12. Hunter Finance
Some of the features and benefits of Hunter Finance’s property developer finance.
- Funding available to experienced and inexperienced developers
- Suitable for developing land or converting commercial properties in to residential
- Decisions made in 48 hours
- Competitive rates
- Maximum loan value of 60% of the purchase price
- Terms of 6 months to 18 months
- Loans from £100,000 up to £2.5 million
- Can offer up to 100% of the development finance costs
- No initial costs or fees
- Additional security may be required under some circumstances
Hunter Finance is an independent lender specialising in products for property developers with short-term funding such as development finance and bridging loans. They provide loans to experienced and inexperienced developers on a range of project sizes from a single house to a small estate.
Hunter Finance state that their products offer competitive rates and fast decisions within 48 hours. They cater largely for residential developments which include new builds and converting commercial properties to residential. They offer a maximum loan value of 60% but may require you to have additional security. Loans are available from £100,000 to £2.5 million with terms of 6 to 18 months.
13. Cynergy Bank
Some of the features and benefits of Cynergy Bank’s property developer finance.
- Offers property investment loans and property development loans
- Available for residential and commercial properties
- Tailored solutions
- Loan to value varies but can be up to 70%
- Terms can vary with development loans up to 24 months
- Investment loans on commercial properties can be for up to 10 years
- Can be used to buy and develop properties
- Refinancing can be offered under the investment loan
- You may be able to capitalise interest
- Dedicated relationship manager
Cynergy Bank is a banking provider that offers a wide variety of business products including loans such as property finance for property investment or property development. Their property investment loan is designed for purchasing or refinancing residential properties as a buy-to-let or for a variety of commercial properties.
Cynergy Bank’s property development loans are designed for buying and developing properties with the loan being repayable in full after the property has been developed. They tailor their development loans to the opportunity so that they can offer the best rates, loan value and term which is normally up to 24 months.
* Please note we may be paid a fee if you visit Newable, Swoop and/or EJ Finance to take out a loan.
FAQ
How does property development finance work?
A property development loan is intended to finance the construction of a home, renovation of an existing property, or substantial restoration of an existing commercial structure – ranging from conversions to entire makeovers.
Unlike a conventional mortgage lender, who will assess the property’s worth, a development financial lending institution will consider the property’s gross development value (GDV).
Most development loans are short-term in nature and are intended to remain only until the construction project is done. Timeframes for more significant commercial development projects might range dramatically from a few months to many years.
The development finance loan is returned after the construction is complete, generally via the sale of the completed home or refinancing into a longer-term mortgage.
This exit strategy is a critical component of the application process for development funding.
What can you use development finance for?
You can use property development finance products to fund land purchase and development costs. There are several reasons why many property developers would choose development funding:
– To aid in financing an extensive development project, such as a conversion or new construction.
– Ground-up development finance to support build costs for properties built from scratch.
– Redevelopments of a private residential property requiring significant structural work.
– Smaller-scale development.
– Access is more practical than applying for commercial mortgages.
– Avoid conventional real estate chains in the property sector.
Can you get 100% development finance?
100% development financing, usually referred to as joint venture finance or JV finance, is a means for a property developer to acquire funds to finish a project without investing their own money.
There are two forms of development finance, 100 per cent financing and joint venture financing. The first is when the lender does not charge interest on the loan but instead requires a larger portion of the profits. JV financing is where the lender charges interest on the amount but wants a lower cut of the earnings after the development is complete.
Typically, the lender and developer split the profits 50/50; however, this might vary.
Many lenders will want you to back the loan with another property, multiple properties, or other valuable assets that you own and have enough equity in. Receiving property finance without a deposit may be possible if these conditions are met.
How do you fund self-build?
Self-build mortgages enable you to borrow money to purchase the land you want to construct and then repay the loan in instalments rather than in one large sum at the start. This finance option also provides funding “in advance” of each stage of the project.
You could borrow around 75% of the land cost and 60% of the construction cost, which means you still need a sizable deposit.
The UK Government has indicated that self-builders would be exempt from paying the Community Infrastructure Levy (CIL), typically imposed when a new property is granted planning permission.
You must, however, follow the protocol, which is time-sensitive. It has also reaffirmed its plan to remove self-builders from Section 106 (S106) Affordable Housing Contributions, but this has been questioned and regularly changed.
What is mezzanine financing?
Mezzanine financing combines loans and equity. A lender will extend credit to a company, but if the business cannot repay the lender, the lending institution will acquire a stake in the business via ‘equity’.
Mezzanine finance may be thought of as either a financial risk or less expensive equity since it bears a higher interest rate (12%-20%) than senior debt received via banks but is much less expensive than equity in terms of the total cost of capital. Mezzanine finance allows a business to raise more money and improve its return on equity.
Why do property developers refinance?
Refinancing a development project can help property developers avoid penalty costs if their project is delayed. Still, it can also benefit property developers who want to finance their next project.
What are the sources of development finance?
There are various financing alternatives available for property developers besides a development loan, joint venture financing, and mezzanine financing. Property developers also have access to the following:
Commercial bridging finance: A bridging loan is used to close a financial gap associated with acquiring or renovating a commercial property.
Bridge-to-let: This financing is reserved for persons interested in purchasing rental properties. The exit plan is often refinancing the debt into a buy-to-let mortgage in these instances.
High street mortgages: These are your standard, everyday mortgages available from the majority of institutions. An application is evaluated based on your capacity to repay the loan and the market value of the property you are purchasing.
Commercial mortgage: This is similar to a high street mortgage, except that the collateral for the loan must be classified as business property.
Auction finance: Similar to a bridging loan, the funds are used to purchase property at auction, primarily to expedite the completion of a transaction.
Most projects will use one or more of these methods to raise the finances necessary to carry out and finish the project.