Development Finance for First-Time Developers
Lenders prefer experienced developers, but first-time developers do get funded. The difference is usually in how the project is presented and how the risk is reduced. This page explains what lenders look for and how to improve your chances.
How development finance works
Development finance is secured against the site and released in stages as work is completed, with a surveyor confirming progress. You pay interest on the amount drawn, not on the whole facility from day one. Most facilities cover part of the land cost and part of the build cost, so you will need to put in your own funds.
What lenders look at for a first project
- Your experience. Relevant experience from construction, surveying, property investment or previous smaller refurbishments helps.
- Your professional team. An experienced architect, contractor and project manager can offset a lack of personal track record.
- The numbers. Build costs, the end value (GDV), the profit margin and a realistic contingency.
- Planning. Planning permission in place, or a clear route to it, is usually expected.
- Your contribution. First-time developers are usually asked to put in more of their own money than experienced ones.
- The exit. A sale of the units or a refinance onto a term mortgage once the work is finished.
Ways to improve your chances
- Start smaller, for example a single house or a conversion, before attempting a larger scheme.
- Use a fixed-price build contract and a contractor with a good record.
- Build a realistic budget with a contingency, and avoid a thin profit margin.
- Prepare a short CV of your relevant experience and a clear project summary.
- Speak to a broker before you commit to the site, so the funding is shaped around the project.
Using bridging first
Some first-time developers buy the site with a bridging loan, then move to development finance for the build. The choice depends on timing and cost. Our guide to development finance vs bridging loans explains the difference.
How we help
Sadi's Commercial Finance, an NACFB and FIBA member based in Chingford, East London, helps first-time developers present their project to suitable lenders. See our development finance page or speak to a specialist.
Frequently asked questions
Can a first-time developer get development finance?
Yes, though lenders will look closely at the project, the professional team and your own contribution.
How much do I have to put in myself?
It varies by lender and project. First-time developers are usually asked for a larger contribution than experienced developers. Treat any figure you hear as indicative until a lender confirms it.
Do I need planning permission first?
Usually planning is in place or clearly achievable before a lender will commit. Some funding is available for the purchase stage while planning is pursued.
How is the money released?
In stages as work is completed, normally checked by a monitoring surveyor.
What if costs go over budget?
Lenders expect a contingency in the budget. Overruns are normally the borrower's responsibility, which is why a realistic budget matters.
Your property may be repossessed if you do not keep up repayments on a loan secured against it.