Finding the Best Development Finance Lenders

Updated: Jun 11



Whether you are an experienced builder or a first-time developer, the success of your development project starts with getting the right finance in place.


There are plenty of Development Finance lenders now in the market and some have strict criteria that they require applicants to pass.


The great news is that we can handle the process for you from start to finish and you don’t have to worry about finding a development finance lender on your own.



The following topics are covered below:



How do Development Finance Lenders differ from Mortgage Providers?


Why Is It Important To Find The Right Development Finance Lender?


Will a Development Finance lender turn me away with no experience?


Can you apply for Development Finance when there are unusual circumstances?


How Do Development Finance Lenders Calculate the Interest Rate?


How can I choose the best development finance interest rate?


Which are the best Development Finance lenders in the UK?


How do we work with you on your Development Finance proposal?



How do Development Finance Lenders differ from mortgage providers?


The key difference between a standard mortgage and development finance is the duration. A typical standard mortgage runs for around a 25-year term, whereas development finance tends to be for between three months and thirty-six months.

When applying, the most significant factor is your exit strategy - i.e. how you will repay the loan at the end of the term.

In development finance, the exit strategy is usually the sale of the development when work is complete or remortgaging to pay back the short-term loan. If there are delays in selling your property, you can also apply for a development exit loan.

The more secure your exit strategy, the better a deal you will be able to negotiate.


Why is important to find the right Development Finance Lender?


With many years of speaking to experienced developers and first-time developers, some of the feedback given is when receiving quotes from a broker, they themselves might not have limited experience in dealing with the lender.


The right lending needs to be competitive, profitable, and structured around your timescales - which is why using an experienced broker is essential.


We negotiate directly with lenders, ensure your application is as strong as possible, and compare products directly to help you make informed choices about the right solutions for your development project. You can have a look at the lenders we have a relationship with here


Will a Development Finance lender turn me away with no experience?


Most development finance lenders prefer clients to have experience in property development, but this does not necessarily mean that there aren't lenders who also cater to first-time developers.

This is where a broker's knowledge becomes invaluable as they will be able to assist you through the application process to make sure there are no errors or mistakes that could prevent you from proceeding.


Can you apply for Development Finance when there are unusual circumstances?


It's not uncommon for an application to have some form of credit issue that can cause concerns for a lender. There may also be cases where the case could have complexities and traditional lenders shy away from clients with 'bad credit' or being self-employed. There are specialist lenders that we work with that can be more flexible and analyse an opportunity on a case by case basis.


A broker's knowledge of lenders and the rates available in the market is crucial. We work with both mainstream lenders including Barclays to the likes of more specialist lenders including Sancus. To have a look at our whole list, you can follow our partner's page



How do Development Finance Lenders Calculate the Interest Rate?

The interest rates offered by lenders vary a great deal across the market. Experience, loan amount, site location and the amount of loan as a percentage of the gross development value (GDV) play great roles in deciding the rate charged.


Loans below £500,000 – these loans tend to pay a higher rate due to the amount of work involved in managing a project. Loans tend to start at around 6.5% per annum, however, these rates are generally only available for experienced property developers. Rates around 9% per annum are common.


Loans above £500,000 – loans of this size to an experienced developer, at a loan to GDV below 70% would most likely be charged between 4.5% and 7.5% per annum depending on demand and quality of the scheme.


For smaller or higher-risk loans, a rate between 0.85% per month and 1.35% per month (10.2% to 16.2% per annum) is more realistic.


Rates from 6.5-7.5% are common for most applications for experienced developers on loans over £1,000,000.


The rate charged is decided based on the following factors:

  • Loan size

  • LTGDV and LTC of the scheme

  • The experience of the applicant and their team

  • The credit history of the applicants

  • The location of the scheme


How Can I Choose the Best Development Finance Interest Rates?


To ensure you apply to the right provider and get the best deal, you need to understand the lender's eligibility criteria.


This knowledge enables you to short-list lenders who are likely to approve your application.


Some of the most common requirements include:

  • Having prior experience in property development.

  • Proof of a viable exit strategy to repay the loan at the end of the term.

  • Clean credit history - although specialist lenders can offer bad credit development finance.

  • Building plans, including material specifications and detailed budgets.

  • A deposit of around 30% is a typical minimum for the land purchase. Most lenders will finance about 70-75% of the initial cost, and 100% of the build cost.

  • Alternative security - such as in another development or property - if you don't have a sufficient deposit.

Rates vary significantly across the market and can change quickly. If you have found a great deal but aren't yet ready to proceed, or want to make sure there aren't better rates out there, give the Accelerated Finance team a ring, and we will source and provide competitive terms.


It can be time-consuming and challenging to make direct comparisons with different terms, charges, fee structures and repayment rates.


Accelerated Finance will complete this task on your behalf, eliminating lenders who we know would reject your application to save time, money and stress.

We work with a broad range of mainstream and niche lenders, with whole-of-market access enabling us to recommend any provider we think is a good fit.


A few of the Lenders we work with include:

  • Sancus International

  • Barclays

  • Hilltop Credit Partners

  • Redwood Bank

  • TAB

  • Aldermore

  • Shawbrook Bank

  • Masthaven

  • Octopus Property

  • West One Loans


Which are the best Development Finance lenders in the UK?



The table below gives a quick comparison of the top UK providers for property development finance.




How do we work with you on your Development Finance Proposal?


The best option is to contact an expert who will run through your development plans and recommend the best course of action.


Our consultants will work with you to consider:

  • Whether development financing is the best option. In some cases, a bridging loan might be more cost-effective, depending on your plans.

  • The expected duration and scope of the development project.

  • How your finances will impact affordability, and therefore how much you can borrow.

  • What terms and rates offer the best deal, including early repayment clauses, interest rate changes and contractual terms.

  • Which lenders offer the most competitive rates for the lending you require.

  • Other costs to budget for, include surveyor costs, which can be £1,000 and above for each site inspection.





Disclaimer


The articles are intended to provide a general understanding of the topic. The contents should not be treated as advice. Please note Accelerated Finance only considers applications for commercial or investment properties.


Your property may be repossessed if you do not keep up repayments on the finance secured against it.