Case Snapshot
- Client: Experienced UK Property Developer
- Project: Ground-Up Residential Development
- Land Value: £650,000
- Build Costs: £1.3 million
- Finance Required: Land and Construction Costs
- Facility Type: Development Finance
- Planning: Full Planning Permission Granted
- Build Period: 13 Months
- Sales Period: 6 Months
- Exit Strategy: Sale of Completed Properties
Why the Client Chose Articus Finance
Property development finance requires a very different approach from a conventional mortgage or bridging loan.
Our client needed a specialist broker who understood how a development facility should be structured around land value, construction costs, contingency, Gross Development Value (GDV), cashflow and the eventual exit strategy.
Articus Finance regularly arranges development finance for experienced property developers across the UK, from smaller residential schemes through to complex multi-unit and commercial developments.
As an FCA-regulated finance broker, Articus Finance also provided the client with the reassurance of working with a regulated UK firm with experience arranging complex property and development finance.
We can advise developers across the wider funding lifecycle, including commercial development finance, bridging finance, refurbishment funding and development exit finance.
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Related Services
- Development Finance
- Commercial Development Finance
- Development Exit Finance
- Bridging Finance
- Property Refurbishment Finance
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The Challenge
Our client had acquired a residential development site and successfully obtained full planning permission for the proposed scheme.
With planning in place, the next stage was securing approximately £1.3 million towards the construction programme.
The anticipated build period was 13 months, followed by approximately six months for sales. The developer also intended to explore opportunities to sell units off-plan during construction.
The challenge was not simply obtaining sufficient finance. The facility needed to provide capital at the correct stages of construction while avoiding unnecessary finance costs on funds that had not yet been used.
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How Does Development Finance Work?
Unlike a traditional mortgage, development finance is typically released in stages.
An initial advance can be made against the land or existing property, with further funds released throughout construction as agreed milestones are reached.
This makes the proposed drawdown schedule particularly important.
For this project, Articus Finance reviewed the client’s construction programme, development appraisal, professional costs and anticipated cashflow before approaching suitable lenders.
This allowed us to structure the funding around the project itself rather than attempting to fit the development into a standard lending product.
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Can Development Finance Cover 100% of Build Costs?
Yes.
Some specialist development lenders can provide 100% of eligible construction costs, although the overall facility will usually remain subject to maximum loan-to-cost (LTC) and loan-to-GDV (LTGDV) parameters.
How much a developer can borrow depends on factors including:
- Land value and purchase price.
- Build costs.
- Gross Development Value.
- Planning status.
- Developer experience.
- Contingency.
- Proposed exit strategy.
Where additional leverage is required, alternative structures such as bridging finance, stretched senior development finance or other mezzanine finance may also be considered depending on the project.
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Our Solution
Articus Finance approached specialist development lenders capable of supporting the project’s full construction programme.
The facility was structured with staged drawdowns as works progressed, ensuring capital became available when required.
Importantly, interest was calculated on funds as they were drawn, rather than the entire undrawn construction facility from day one. This helped control the developer’s overall finance costs throughout the project.
We worked closely with the client, lender and professional team to ensure the drawdown schedule reflected the anticipated construction milestones and monitoring surveyor requirements.
The structure also considered the client’s eventual exit from the facility from the outset, rather than treating this as something to address once construction was complete.
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The Outcome
The client secured the funding required to proceed with the development, providing greater certainty over the construction budget and allowing works to progress according to the proposed programme.
The funding structure provided:
- £1.3 million towards construction costs.
- Staged drawdowns throughout the build.
- Interest charged on drawn funds.
- 13-month anticipated construction period.
- Six-month sales period.
- Flexibility to pursue off-plan sales.
- A clear exit strategy following completion.
Importantly, the exit strategy was considered before the development facility was completed.
If completed units take longer to sell than anticipated, development exit finance can potentially refinance the original development facility, provide additional time for sales and reduce ongoing borrowing costs.
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Frequently Asked Questions
How much deposit do I need for development finance?
There is no single figure. Lenders assess the site value, development costs, GDV, developer experience and overall LTC and LTGDV. Existing equity in a development site can sometimes contribute towards the developer’s required equity.
Can development finance fund 100% of build costs?
Yes, some lenders can fund 100% of eligible construction costs, subject to the overall leverage, developer experience and strength of the project.
Articus Finance’s development finance service provides access to a wide range of specialist development lenders and private funders.
Do you pay interest on the entire development loan?
No. Development facilities are commonly drawn in stages, with interest generally accruing on funds that have actually been advanced rather than the entire facility from day one.
The precise structure varies between lenders and should be considered carefully when comparing development finance options.
How are development finance funds released?
Construction funding is generally released in agreed stages as works progress.
A monitoring surveyor or quantity surveyor will typically inspect the project and report to the lender before subsequent construction funds are released.
What happens when the development is finished?
The facility is typically repaid through the sale of the completed properties or refinancing.
Where a developer requires additional time to sell completed units, development exit finance may provide a lower-cost alternative to remaining on the original development facility.
Can I get development finance without previous development experience?
Potentially. While experience can increase the number of available lenders, some specialist lenders will consider first-time developers, particularly where an experienced contractor and professional team are involved.
Articus Finance has previously arranged funding for property developers with no previous development experience.
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Related Case Studies
- Securing Development Finance for a £2.4m Residential Scheme in the North West
- Bridging and Development Finance for a £26 Million GDV Project
- Development Finance for a Property Developer With No Experience
- Development Finance to Buy-to-Let Refinance for an Offshore London Property
- View All Case Studies
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Looking for Development Finance?
Whether you are acquiring a development site, preparing to start construction, refinancing an existing development facility or approaching the end of a project, Articus Finance can help structure the appropriate funding solution.
Our team works with specialist development lenders across the market and can advise on development finance, bridging finance, refurbishment finance and development exit finance.
Speak to Articus Finance today to discuss your project, indicative leverage and potential development finance structure.