How Does Property Development Finance Work? A Step-by-Step Guide
Brickflow sets out how development finance works for developers funding new builds, conversions and major refurbishments. Unlike a mortgage, it is a short-term loan, usually repaid within 9 to 36 months through the sale of the finished scheme or a refinance onto a long-term loan. Around £15 billion of development loans are issued in the UK each year, yet only about 55% of developers secure funding from the first lender they approach. Brickflow’s Q1 2025 data showed loans ranging from £25,000 to £150 million.
A project’s capital stack typically combines senior debt secured on the property, the developer’s own equity and, optionally, mezzanine finance that sits between the two to reduce the equity required.
The process usually runs from site acquisition (sometimes using a bridging loan first) to an application setting out gross development value, build costs, planning status and exit strategy. Indicative terms follow, then underwriting, an independent valuation and quantity surveyor report, and legal checks on title, planning and existing charges. Once the loan completes, funds are released in stages as the QS certifies progress, and the loan is repaid at the end.
Typical figures cited include rates of 6–12% a year (averaging 10.93% in Q1 2025), usually rolled up; arrangement fees of 1–2%; exit fees of up to around 2%; loan-to-GDV of 65–75%; and loan-to-cost of 80–90%.
Lenders generally look for planning permission, one or two completed projects, personal guarantees, an SPV or limited company structure, good credit and a clear exit. The guide advises realistic GDV estimates, experienced advisers, contingency funds and early engagement with brokers, and warns against proceeding without planning or an exit plan. Brickflow says its platform connects borrowers with more than 100 lenders.
