How development finance works, stage by stage

The shape of a facility

A development facility is agreed as a total, but it is not all handed over at once. At the outset, the lender and borrower agree a schedule of works — the stages, how much is released at each, and the expected timeline. Money is then drawn down against that schedule as the build reaches each milestone, so the funding tracks the actual progress on site.

The typical stages

1. 01

   Site purchase

   An initial tranche helps acquire the site or the property to be developed.

2. 02

   Groundworks and substructure

   Clearing, foundations and everything up to ground level.

3. 03

   Superstructure

   The building goes up — walls, floors and roof, to a wind and watertight shell.

4. 04

   First and second fix

   Services, plastering, then kitchens, bathrooms and finishes.

5. 05

   Completion

   Final works, sign-off, and the scheme is ready to sell or let.

The role of the monitoring surveyor

Before each tranche is released, an independent monitoring surveyor visits the site and certifies that the work to that stage has been done and is on budget. This protects the lender and keeps the project honest — money follows completed work, not promises. Interest is usually charged only on the amounts drawn down so far, and can often be rolled up and settled at the exit.

The exit that repays it

At the end of the programme the facility has to be repaid, so the exit is planned from the start. The two usual routes are a sale of the finished units, or a refinance onto longer-term finance — for example, holding the completed units and moving onto buy-to-let or commercial mortgages. A weak exit is the most common reason a good-looking scheme struggles, so it is worth getting right early.

Package the scheme properly

Lenders back schemes that are clearly costed, programmed and evidenced. Housn Capital introduces you to a specialist broker who can present the project the way a development lender wants to see it. Tell us about the scheme to get matched.

Frequently asked questions