How to Prepare a Development Finance Application

The appraisal is the one-page summary that tells the lender what the scheme is, what it costs, what it will be worth and what the margin looks like. Every senior lender starts here. If the appraisal does not work, nothing else matters.

Required content: site address, planning consent reference, scheme description (number and type of units, approximate GIA), purchase price, build cost, fees, rolled-up interest estimate, total project cost, Gross Development Value, profit on cost percentage, profit on GDV percentage. A standard developer's appraisal template (Argus, BCIS, or a clean Excel sheet) does the job.

The GDV calculation is the most-scrutinised item. Use comparable evidence from the immediate area, within the last 12 months, on similar specification units. Lenders' valuers benchmark to the median comparable, not the top of the market. If your appraisal uses the top comparable, the valuer will downgrade the GDV and you will lose 5-10% of the senior loan you thought you had.

Lenders want a QS-produced cost plan, not a contractor estimate. The cost plan should be itemised by build stage (substructure, superstructure, internals, externals, M&E, fit-out, fees and prelims) with quantities, rates and a clear contingency line. BCIS-benchmarked rates carry more weight than contractor quotes with no underlying rates breakdown.

Contingency: build in 10% on a residential ground-up scheme and 12-15% on a conversion. Lenders will negotiate this down but starting low is a tell that you are inexperienced. Lower than 7.5% on any scheme will be pushed back by every credit team.

Programme: a Gantt chart showing build sequence, milestone payments and projected practical completion date. Twelve to twenty-four months is typical. A six-month build on a ten-unit scheme is not credible and the lender will push back. An eighteen-month build with a 10% contingency on programme reads as professional.

A two-page developer CV with photos. Previous schemes: location, unit count, GDV, sale evidence (Land Registry sold prices), completion year, lender used. Lenders cross-reference Companies House and Land Registry to verify - omitting or misrepresenting prior schemes is the fastest way to lose credit committee.

First-time developers can still get senior debt but the lender panel narrows and leverage caps at 60% LTGDV (vs 65% for experienced). Strengthen the case with the team around the developer: a chartered QS with relevant project experience, a main contractor with a portfolio of completed schemes of similar scale, a JCT contract format (not a standard form contract).

If the developer has had a scheme that did not go well - cost overrun, time overrun, breached covenant - mention it briefly and explain what changed. Hiding it is worse than disclosing it. Lenders' due diligence will find it; how you explain it shapes the credit team's read of you.

Senior lenders prefer to lend to a single-purpose vehicle (SPV) limited company. SPV per scheme, with one or two directors who are the developer principals. Companies House registration in place, share structure clear, no other trading or assets in the SPV.

Where there are JV partners or external investors in the SPV, full disclosure on day one. Hide a 30% JV partner from the initial submission and the lender will pull the deal when it surfaces at legals. Disclose at submission and the lender will price the JV equity into their inter-creditor terms.

Personal guarantees: most senior lenders require a personal guarantee from the developer principals, typically capped at 20-30% of the loan as a cost-overrun guarantee. We negotiate the cap at heads-of-terms stage. Going in with a clear position on what you will and will not sign saves a week of back-and-forth.

Lenders want a credible exit modelled at submission. Three routes: sales-led (units sold off-plan or on completion), refinance-led (units retained and refinanced onto BTL), or development exit bridge (short-term bridge takes out the development facility at PC for a 12-18 month sales window).

Supporting evidence: agent's comparable evidence for sales-led exits, indicative BTL rental valuations for refinance-led exits, and a clear note on what happens if the primary exit slips. Most schemes need a mix - some pre-sales, some refinance, some sold post-PC. A clean exit strategy section anticipates the lender's questions before they ask them.

Development exit bridges are the cleanest fall-back. Most senior lenders price comfortably knowing the exit bridge is available at PC if sales are slower than expected. Mentioning the exit bridge in the appraisal signals that you have thought through the sequence beyond just the build.

With the pack assembled, lender selection drives everything that follows. Submitting to the wrong lender wastes 2-3 weeks. Each lender has appetite quirks: some only fund residential, some prefer commercial conversions, some have minimum loan sizes, some have geographic preferences, some are tight on first-time developers, some are stretched-senior specialists, some only write the very vanilla cases.

Doulton matches each scheme against four to six lenders most likely to write the case at the best terms. We submit to all four to six in parallel rather than serially - parallel submission gets you four offers back to compare, serial submission burns weeks waiting for one decline at a time.

Indicative terms back within 24-48 hours from a clean pack. Heads of terms within 7-10 working days from a chosen lender. Valuation and MS appointment within the following week. Credit-backed offer 4-6 weeks from submission. Legal completion 4-8 weeks from offer. Total: 8-12 weeks from initial enquiry to day-one drawdown on a clean case.

The most common mistakes show up in the same places every time. Inconsistent numbers between the appraisal, the cost plan and the programme. A 5% contingency in one column and 10% in another, an 18-month programme but rolled-up interest calculated on 12 months. Lenders find these inconsistencies and slow down to query them.

Top-of-market GDV with no comparable evidence. Overstated developer track record (schemes claimed that did not complete, or were not the applicant's). Hidden JV partners surfaced at legals rather than disclosed at submission. A contractor with no track record on similar scale. An exit strategy that depends on selling all units in six months in a soft market.

Each of these adds 1-2 weeks to the process. Combined, they can turn a 10-week deal into a 6-month deal - by which point the seller has moved on, the planning consent is closer to lapsing, or the developer's cash has been tied up elsewhere. Most are avoidable with a 30-minute review of the pack before submission.