Development finance is the fuel behind most new-build projects in the UK, from single house builds to schemes of hundreds of units. It works fundamentally differently from a standard mortgage because the security (the property) does not exist yet, or exists in an incomplete state that has limited value.\n\nHow Development Finance Works — The lender advances funds in stages, called drawdowns or tranches, as construction milestones are reached. A monitoring surveyor appointed by the lender inspects the site before each drawdown to confirm the work has been completed to the required standard. Initial drawdowns typically cover land purchase and planning costs, with subsequent drawdowns funding construction phases.\n\nTypical Structures — Gross Development Value (GDV) is the estimated total value of the finished scheme. Lenders typically advance up to 60–70% of GDV and up to 80–90% of total costs (land plus build). Interest rates run from about 6% to 12% depending on experience, scheme size, and risk profile. Terms are usually 12 to 24 months.\n\nDay One Land Funding — Some lenders will advance funds to cover the land purchase on day one. Others require you to have already purchased the land using cash or bridging finance. Day one land funding is more expensive but eliminates the need for a separate bridging loan.\n\nWhat Lenders Want to See — Detailed planning permission (not just outline). A full schedule of works with costings from a quantity surveyor. Your development track record (first-time developers face tighter criteria). Evidence of professional team (architect, project manager, contractor). A realistic sales or exit strategy with supporting evidence of local demand.\n\nKey Lenders — LendInvest, Shawbrook, Together Money, United Trust Bank, Maslow Capital, Octopus Real Estate, and Atelier are active in the development space. For larger schemes (above 5 million), Investec, OakNorth Bank, and Silbury Finance are worth considering. For smaller projects or first-time developers, Close Brothers, Magnet Capital, and some specialist bridging lenders offer more flexible terms.\n\nProfit Margins — Most lenders want to see a projected profit margin of at least 15–20% on cost for the scheme to be viable. Below this, the buffer against cost overruns and market dips is too thin. Experienced developers often target 20–25% profit on cost as a minimum before committing.