How to Get the Most Out of Development Finance
Development finance is a specialist form of funding designed to support property developers at every stage of a project. Whether you’re purchasing land, converting an existing building or constructing new homes from the ground up, development finance provides the capital required with funds typically released in stages as work progresses.
While securing funding is essential, understanding how to get the most out of development finance can significantly improve the success and profitability of your project. Here are some key points to consider before and during the process.
Understand your project inside and out
Preparation is critical when applying for development finance. Lenders will expect a clear and well-structured proposal that outlines the full scope of the project. This should include planning permission, accurate build costs, realistic timelines and a defined exit strategy.
A detailed plan demonstrates competence and reduces the perceived risk for lenders. It also helps you anticipate challenges, control costs and avoid delays. The clearer and more professional your proposal, the smoother the approval process is likely to be.
Choose the right funding partner
Not all development finance lenders operate in the same way. Some focus on smaller projects, while others specialise in large-scale developments. Loan structures, flexibility and appetite for risk can vary significantly.
Rather than focusing solely on the lowest interest rate, consider how supportive and experienced the lender is. A lender that understands your type of development project can offer valuable guidance, flexibility with drawdowns and practical solutions if challenges arise during the build.
Working with a lender that aligns with your project goals can make the entire process far more efficient.
Leverage your assets wisely
Development finance is secured lending, typically against the land or property being developed. In some cases, using additional assets as security, such as other properties, can improve borrowing terms or increase the amount you can raise.
While this can reduce the overall cost of borrowing, it also increases your exposure. It’s important to weigh the benefits carefully and ensure you are comfortable with the level of risk involved if the project does not go exactly as planned.
Build strong relationships
Long-term relationships matter in property development. Developers with a proven track record and a history of successful projects are often viewed more favourably by lenders.
Consistent communication, transparency and meeting agreed milestones can build trust over time. Strong lender relationships may lead to faster decisions, more flexible terms and greater funding opportunities on future projects.
Prepare for all costs, not just the interest
Interest rates are only one part of the overall cost of development finance. Other expenses such as arrangement fees, valuation and monitoring fees, legal costs and exit fees should all be factored into your calculations.
A loan with a lower interest rate may not always be the most cost-effective once all fees are included. Seeking professional advice and understanding the full cost from the outset helps you plan more accurately and avoid unpleasant surprises later on.
Plan your exit strategy early
Every development finance lender will want to know how the loan will be repaid. This is known as the exit strategy and is usually achieved by selling the completed development or refinancing onto a longer-term mortgage.
Planning your exit early helps you make informed decisions throughout the project and reassures lenders that the loan is sustainable. A clear exit strategy also allows you to forecast returns and adjust your approach if market conditions change.
Securing development finance for your project
Getting the most out of development finance is about more than securing funding. It requires careful planning, choosing the right partners, understanding all associated costs and managing risk effectively.
With the right approach and professional guidance, development finance can be a powerful tool by enabling you to unlock opportunities, complete projects successfully and build a profitable property portfolio over time.
If you’d like to discuss the options available to you and your project, contact Exe Mortgages where we’d be delighted to help.
