Development Finance Frequently Asked Questions

Most development facilities draw down in two parts. The day-one tranche covers the land or property purchase plus fees, typically released in full at legal completion. The construction tranche is then released monthly in arrears against the monitoring surveyor's valuation of work done on site. Each month the MS visits site, reviews invoices and certifies work in place. The lender then releases that month's drawdown into the developer's account, usually within 5-10 working days. Most schemes run 6-10 drawdowns over a 12-24 month build.

A monitoring surveyor (MS) is an independent chartered surveyor who acts for the lender, certifying that build work has actually happened before each drawdown is released. They produce an initial cost report at the start (assessing whether the build cost is realistic) and monthly progress reports thereafter. Every senior development facility above around £500k will require an MS. Doulton instructs the MS on most cases and manages the monthly cycle directly with the lender and the developer's quantity surveyor.

The quantity surveyor (QS) works for the developer, producing the build cost plan, managing tender, certifying interim payments to the contractor and tracking cost vs budget. The monitoring surveyor works for the lender, reviewing the QS's certifications and confirming the lender can release funds. Smaller schemes often run with one professional acting as both, where the lender allows it. Larger schemes always have a separate QS and MS.

On a properly packaged scheme, 5-10 working days from the MS site visit to funds in the developer's account is normal. The cycle is: contractor invoices the developer, developer's QS approves the application for payment, MS visits site (usually monthly), MS issues report to lender, lender reviews and releases. Delays are almost always at the MS or developer QS stage rather than the lender - which is why we run drawdown cycles from the broker's side on most cases.

Yes, but the lender panel narrows and leverage tightens. Most senior lenders will look at a first-time developer if the team around them is strong: a credible main contractor with a track record, a chartered QS, a clear and conservative GDV from a recent comparable scheme. Leverage typically caps at 60% LTGDV (vs 65% for experienced) and rates run 0.1-0.2% per month higher. We have placed dozens of first-time developer schemes - the key is positioning the team's strength, not pretending the developer is more experienced than they are.

Almost always, yes. Senior lenders prefer a special purpose vehicle (SPV) limited company per scheme - it ring-fences risk, simplifies the security position and is tax-efficient for the developer. Trading via a personal name is possible on small schemes (under £500k) with a few specialist lenders but rare. LLPs are accepted by some lenders. JV structures usually have a JV-co Ltd above the SPV. We help you set up the SPV correctly and avoid the common tax pitfalls.

Most senior development lenders require a personal guarantee from the developer, but the structure matters. The most common form is a cost-overrun guarantee, capped at 20-30% of the loan amount, only triggered if build costs exceed the budget. Full recourse personal guarantees on the entire loan are rare on properly structured deals. We negotiate the guarantee cap as part of the heads of terms - it is one of the most negotiable items in a development facility.

Indicative terms back from lenders within 24-48 hours of a properly packaged enquiry. Heads of terms and credit-backed offer in 7-15 working days. Valuation and monitoring surveyor reports in 2-4 weeks. Legals and completion 4-8 weeks from heads of terms. Total: a clean case completes in 8-12 weeks. Cases with planning issues, multiple lenders or stretched senior structures run 12-16 weeks. Auction or urgent purchases can be bridged short-term and refinanced onto the development facility.

Three routes dominate. Sales-led exit: units sold off-plan or on completion repay the loan unit by unit. Refinance exit: development facility refinanced onto BTL or commercial term loan at PC, with units held as a portfolio. Development exit bridge: short-term bridge taken at PC to unwind the development facility and give the developer 12 months to complete sales without time pressure. Most schemes need a mix - some units sold, some refinanced. We model the exit at submission and arrange the exit facility through the same broker.

A development exit bridge is short-term finance that takes out a development loan at practical completion. The development facility is structured to settle on PC, but unit sales often take 6-18 months from PC. Rather than pay penalty interest on an overrunning development loan, the developer refinances onto a cheaper exit bridge (0.55-0.75% pm) for the sales period. The exit bridge is typically up to 75% of finished GDV and runs 6-18 months. Doulton arranges the development facility and the exit bridge through the same case file.

Yes - and the structure depends on the scope of works. Light PD conversions (cosmetic resi conversion of an office shell) run on heavy refurbishment bridging at 70-75% LTV with a single drawdown cycle. Heavy PD conversions involving structural work or additional storeys sit on a true development facility at 65% LTGDV with monthly drawdowns. Lender selection turns on prior approval status, asset class and developer track record. See our dedicated permitted development finance page for the full structure.

Mezzanine is subordinated debt sitting between senior development finance and developer equity. It fills the 5-15% LTC gap above senior debt, lifting effective leverage to 90% LTC. Priced as a rolled-up coupon at 12-20% pa or as a profit share. The developer keeps the upside above the mezzanine cost. Use it when you want to recycle equity into the next site rather than tie it all into one scheme, or when you cannot fund the full equity gap on a deal you want to win. Inter-creditor terms with the senior lender are the critical document - we negotiate this from the developer's side.

Gross loan is the total facility committed by the lender - including rolled-up interest, fees, retained drawdowns and the working construction tranche. Net loan is what actually arrives in the developer's account on day one. The gap is typically 5-15% of gross, depending on rolled-up interest assumptions and arrangement fees. When comparing lender offers, always compare net day-one funds released and total cost of capital across the full loan term - the gross loan headline figure is misleading.