What a Development Finance Broker Changes, and What They Do Not

A development finance broker is an intermediary who takes a developer’s scheme to multiple lenders, negotiates terms and manages the case to drawdown. That is the description. The useful question is what measurably changes because one is involved, and the honest answer is that it depends entirely on the scheme.

On a straightforward residential scheme sitting comfortably inside every ceiling, with an experienced developer and a strong pack, a broker adds convenience and a modest saving. On a case pressed against the loan to gross development value limit, or a first scheme, or anything with commercial content or an unusual build sequence, a broker frequently determines whether the deal happens at all.

This article sets out both sides of that, including the parts that argue against using one.

What is a development finance broker?

A development finance broker is a commercial finance intermediary who arranges funding for property development schemes. The broker does not lend. The broker presents the case, and the lender lends.

Three things separate a development finance broker from a general commercial finance broker or a mortgage adviser.

The product is staged. Development finance is drawn in tranches against a monitoring surveyor’s certificates, so the broker has to understand build programmes, cost plans and drawdown mechanics rather than just criteria and rates.

The borrower is usually a company with no history. A special purpose vehicle holding one site has no accounts to submit, so the case is made from the scheme and the people rather than from financial statements.

The market is opaque. There is no comparison site for development lending, criteria change quarterly, and appetite is invisible from outside. A broker’s stock in trade is knowing which desks are actually writing business this month.

Adjacent products come with the territory: bridging loans for site acquisition, mezzanine finance behind the senior debt, development exit finance at the end of a build, and commercial mortgages as a hold exit. A property development finance broker who only knows one of those will structure a scheme badly at the joins.

What does a broker do that a developer cannot do themselves?

Nothing, in principle. A developer can approach lenders directly, and plenty do successfully. What a broker brings is coverage, presentation and pattern recognition, and the value of each varies by case.

Coverage first. A developer approaching lenders directly will realistically reach three or four. Our lender panel runs to over 100, and offers on the same scheme regularly differ by more than 20 percent of total funding cost. Reaching four lenders when the spread is that wide means the developer has sampled the market rather than searched it.

Presentation second, and this is underrated. Lenders decline cases they cannot assess, and a submission missing a cost plan, a contractor, a contingency or comparable evidence is a case that cannot be assessed. A broker’s first job on most files is not finding a lender. It is assembling a pack that a credit committee can actually say yes to.

Pattern recognition third. Knowing that a scheme with 30 percent commercial floorspace will not price on residential terms, that a self-delivering developer will lose five points of gearing, that a lender who was keen in March is now full, or that the build sequence on a phased scheme needs a facility structured differently. That knowledge comes from volume and it is the part a developer cannot easily replicate on one deal a year.

What a broker cannot do is change the arithmetic. If the scheme needs 80 percent of gross development value and the market ceiling for senior debt is 65 to 70 percent, no relationship fixes it. The options are more equity, a second layer of capital, or a different site, and a good broker says so early rather than taking the case to twelve lenders to prove it.

How do finance brokers get paid on a development case?

Two ways, sometimes both, and you should ask which before instructing anyone.

A procuration fee from the lender, paid on completion, typically a fraction of a percent of the facility. This costs the developer nothing directly, and it is standard across property finance.

A broker fee from the client, also usually on completion, and on development cases commonly around 1 percent of the facility. Some brokers charge a smaller engagement fee up front to cover the work of preparing a case, credited against the completion fee.

The questions worth asking are simple. Is there a fee to the client, and how much. Is there a procuration fee from the lender, and does it vary between lenders. Is any part payable if the deal does not complete. And is the fee on the facility or on the drawn amount, because on a development loan those are different numbers.

That second question is the one that matters most. If a broker receives materially different procuration fees from different lenders, there is a conflict, and the right response is not outrage but transparency: ask for the fee to be disclosed on each recommended option. A broker who will not answer that is telling you something.

The general principle is that development finance broker fees are paid on success, which aligns the incentive reasonably well. The misalignment that remains is towards completing a deal rather than towards advising against one, and the counterweight to that is a broker who has told you before now that a scheme does not work.

How much does development finance cost, and which parts can a broker move?

Take the whole cost and mark each line as movable or fixed.

Interest, from 6.5 percent a year on our lender panel, charged on the drawn balance. Movable, through lender selection and through gearing. A scheme at 60 percent of gross development value prices below one at 70 percent, and choosing to put more equity in is a pricing decision as much as a funding one.

Arrangement fee, 1 to 2 percent of the facility, paid to the lender at first drawdown. Movable at the margin, mostly through which lender you use rather than through negotiation.

Exit fee, where charged, and critically whether it is calculated on the loan or on gross development value. Movable, and this is where a broker earns their keep, because a 1 percent exit fee on a £3,000,000 gross development value is £30,000 while the same headline percentage on a £2,000,000 loan is £20,000.

Monitoring surveyor costs across the build. Largely fixed, though drawdown frequency affects the number of visits.

Valuation, and legal costs on both sides. Fixed, and the borrower pays them.

Broker fee, if any. An added cost that has to be justified by the reductions above.

The honest arithmetic on a £2,000,000 facility looks like this. Total funding costs run somewhere around £190,000 to £230,000. A broker who moves the case from a mid-market offer to the keenest suitable lender might reduce that by £20,000 to £40,000, against a fee of around £20,000. On a straightforward case that is close to a wash. On a case where the alternative was a decline, or where the gearing improved enough to save £150,000 of equity, it is not close at all.

The costs a broker never reduces are the professional ones, and any broker suggesting otherwise is not describing this market.

Who are the top development finance lenders in the UK?

There is no credible answer to this question, and it is worth explaining why rather than publishing a list.

Development lending is not a product with a rate table. The best lender for a 6 unit housing scheme in a market town, from a developer with two completions behind them, at 65 percent of gross development value, is not the best lender for a 40 unit mixed use block from a first time developer at 70 percent. Those are different desks with different criteria, and neither is better in the abstract.

Appetite also moves constantly. A lender that has just written three apartment schemes in one city will decline the fourth on concentration grounds. A fund behind on its deployment target will price keenly this quarter and defensively next. None of that is visible from outside, and a published ranking would be stale within a month.

What is stable is the category structure. Clearing banks lend cheapest at the lowest gearing to established developers. Specialist development finance businesses write the bulk of the market from 6.5 percent a year to 65 or 70 percent of gross development value. Debt funds go higher on both gearing and price, and dominate the larger deals. Peer to peer platforms fund smaller schemes competitively but raise the money rather than committing it. Mezzanine providers sit behind the senior lender from around 12 percent a year, stretching the stack to 85 to 90 percent.

Work out which category your scheme belongs to, and you have answered the real question. Anyone offering you a definitive top ten is selling a list rather than describing the market.

Where does a development finance broker add nothing?

Four situations, and it is worth being straight about them.

You already have a lender relationship that works. A developer on their fifth scheme with a bank that knows them, at terms they understand, is unlikely to improve on that through an intermediary. The relationship is the asset.

The scheme is small and simple. On a facility below about £300,000, the fee is a large proportion of the total funding cost and the market is thin enough that there is little to search. Bridging loans or refurbishment finance may fit better than development finance in any case.

The scheme does not work. If the required facility is well above the ceiling and there is no equity, a broker cannot fix it. Taking that case to market wastes everybody’s time and produces a file with a trail of declines on it, which makes the next attempt harder.

You have the time and the appetite to do it yourself. Approaching four to six well chosen lenders with a properly prepared pack is entirely achievable for a developer who understands the product. The work is real but it is not secret.

A broker who cannot tell you when you do not need one is a broker whose advice on the rest is worth discounting.

What does a broker change on a first scheme?

More than on any other kind of case, because a first application fails for reasons that have nothing to do with the site.

A first time developer’s problem is not usually the scheme. It is that lenders assess construction risk partly through the borrower’s track record, and there is none. The case therefore has to be built so that the experience sits elsewhere and is visible.

In practice that means a named main contractor with relevant completed work and a contract type stated. A quantity surveyor’s cost plan rather than a builder’s estimate. A contingency at 10 percent on straightforward residential work, higher where there are groundworks unknowns. A project manager or monitoring arrangement with real authority. Gearing pitched sensibly below the ceiling rather than at it. And an exit evidenced from comparable sales rather than asserted.

Assembled that way, a first scheme is fundable across a decent slice of the market. Submitted as a purchase price, a rough build cost and an optimistic end value, it is declined everywhere, and the developer concludes that development finance is closed to newcomers when in fact the application never described a risk anyone could price.

The other thing that changes is which lenders see it. Banks generally will not fund a first scheme. Specialists often will, on conditions. Funds will, at a price. Knowing that in advance stops a developer spending six weeks on a category that was never going to say yes.

How does the exit shape the funding, and where do mortgages come in?

Every development facility is written against an exit, and the exit is where a broker’s wider product knowledge matters.

Sales are the standard exit. Units complete, the lender releases its charge on each plot against an agreed minimum price, and the proceeds pay the loan down. The broker’s job here is to make sure the minimum release prices leave enough flexibility to move a slow unit.

Refinance onto term mortgages is the exit where the developer is holding. Residential units go onto buy to let mortgages. Commercial units go onto commercial mortgages, from 5.5 percent a year, up to 75 percent loan to value, with rental income covering 125 to 150 percent of the payment. That interest cover test is the thing to check before the build starts, not after, because a scheme that will not pass it has no refinance exit and the developer discovers that at the worst possible moment.

Development exit finance is the third route, used when the build is complete and the units are still selling. It refinances the maturing facility onto short-term money at up to 75 percent of value, from 0.55 percent a month, over a 6 to 18 month sales window, releasing charges plot by plot as sales complete. It costs less than the tail of a development facility and it removes the pressure to discount.

The structural point is that these products interact. A scheme bought on bridging loans, built on development finance and held on commercial mortgages has three facilities and two handovers, and the terms of each affect the next. Arranging them separately, with nobody looking at the whole sequence, is how developers end up with a bridge that matures before consent lands or a build that cannot pass an interest cover test on refinance.

Which products sit around property development finance, and how do they join up?

A scheme rarely uses one facility. It uses a sequence, and the joins are where money is lost.

Bridging loans usually come first. A site bought before detailed consent cannot be funded by property development finance, because there is no scheme to size a facility against. A bridging loan buys the land at its current value, up to 75 percent loan to value on residential security and 65 to 70 percent on commercial, from 0.55 percent a month over a term of 1 to 18 months. Auction purchases with 28 day deadlines run the same way. The bridging loan is then refinanced by the development facility once consent lands.

Senior property development finance is the main event. From 6.5 percent a year on our lender panel, up to 65 to 70 percent of gross development value, drawn in stages against certification.

Mezzanine finance sits behind it in a second charge where the senior loan does not reach far enough. From around 12 percent a year, taking the total to 85 to 90 percent of gross development value and cutting the developer’s equity requirement to roughly 10 to 15 percent.

Equity and joint venture capital sits above that, priced not as a rate but as 40 to 60 percent of the profit.

Development exit finance comes at the end, refinancing a maturing facility while units are still selling, at up to 75 percent of value from 0.55 percent a month.

Commercial mortgages and buy to let mortgages are the hold exit, taking over when the property is complete and let.

Now the joins, because this is the part a property development finance broker is actually useful for.

The bridging loan has a term and planning has a timetable, and they do not match. Price the bridging stage on a pessimistic consent date, and confirm the bridging lender will extend before you need them to.

The development facility repays the bridging loan on day one, so the bridge amount behaves as the land tranche in the loan to gross development value arithmetic. Developers who model the two facilities separately double count the acquisition costs and understate the total.

The refinance exit has its own test. Commercial mortgages require rental income covering 125 to 150 percent of the payment, so a scheme that will not let at the assumed rent has no refinance exit. Check that at appraisal rather than at practical completion.

And the exit facility has a minimum value. If the remaining units are worth less than the outstanding debt, development exit finance cannot rescue the position, so the decision to refinance has to be made while there is still equity in the scheme.

A broker arranging one of these products in isolation is not doing the job. The sequence is the product.

What does a property development finance broker do after the offer?

Most of the work, and this is the part developers do not see when they compare a broker fee against a rate saving.

An offer is not money. Between a term sheet and a first drawdown there are typically four to eight weeks of process, and property development finance cases fall over in that window more often than they fall over at credit.

Valuation management comes first. The broker instructs or coordinates the valuer, supplies the comparable evidence pack, and deals with the report when it lands. If the gross development value comes back below the appraisal, the facility shrinks immediately, and somebody has to decide within days whether to fund the gap, add mezzanine, challenge the report on new evidence or move the case. A developer meeting that for the first time loses a fortnight deciding.

Monitoring surveyor appraisal is next. The surveyor reviews the cost plan, the programme, the contractor and the contingency, and reports to the lender on whether the scheme can be built for the money. A cost plan that looks light for the specification comes back with a higher figure, and the property development finance facility is then sized on the surveyor’s number rather than the developer’s. Anticipating that is far cheaper than reacting to it.

Legals run in parallel and are the most common cause of delay. Title issues, unsatisfied planning conditions, missing building regulations approvals on an existing structure, rights of access, restrictive covenants, and the security package over the special purpose vehicle. On a development loan the borrower pays both sides, so delay is expensive in fees as well as in time.

Conditions precedent are the last hurdle. Every facility lists what must be satisfied before first drawdown: signed contracts, evidence of the developer’s equity, insurance in place, collateral warranties from the professional team, and often a signed building contract. Missing one holds the whole facility.

Then the drawdown cycle itself, monthly for the life of the build. The broker’s role here varies. Some hand over at completion. Some stay involved, chasing certificates and release, which matters because the developer is carrying the cash flow gap between paying the contractor and being paid by the lender.

Ask any prospective property development finance broker which of those they actually do. The answer varies enormously between firms charging similar fees.

What happens when a scheme goes wrong mid-build?

This is the test of whether a property development finance relationship was worth having, and it is worth knowing the shape of it in advance.

The three things that go wrong are cost, time and value, and they tend to arrive together.

A cost overrun shows up in a monitoring surveyor’s report before it shows up in your bank account. Almost every property development finance agreement requires the borrower to fund a projected overrun in cash before further money is released, which converts a paper problem into an immediate cash call. The options are equity, a mezzanine top up behind the senior loan, or a conversation with the lender about restructuring, and the order in which you explore them matters because each one takes time you may not have.

A programme overrun costs interest on the drawn balance plus extended preliminaries plus, at the end, an extension fee of 0.5 to 1 percent and a margin uplift. Extension is at the lender’s discretion. Some development finance businesses extend routinely and some use the moment to reprice hard, and that difference does not appear on any comparison of headline rates.

A value fall is the worst of the three because it is outside anyone’s control. If gross development value drops after drawdown, the facility does not shrink but the equity underneath it does, and the exit assumptions stop working. The responses are to slow down and refinance onto development exit finance, to hold and let the units on term mortgages if the numbers work, or to sell into the market that exists.

What a broker adds in these moments is not magic. It is that they have had the conversation before, they know which lenders restructure and which enforce, and they can put a refinance in front of a different lender quickly if the incumbent has stopped being reasonable. A developer having this conversation for the first time, alone, with a lender who holds a first charge over their site, is in a materially weaker position.

The best time to establish whether your broker will be there for that is before you instruct them, not during.

What does a good development finance submission contain?

The pack decides the pricing more than the negotiation does, so it is worth listing what goes in.

The site: title, tenure, planning consent, conditions still to discharge, and any legal constraints such as easements or restrictive covenants.

The scheme: drawings, accurate floor areas stated as gross or net internal, unit mix, and a schedule of finishes.

The costs: a quantity surveyor’s cost plan with a contingency inside it, professional fees, and the build programme with dates.

The team: contractor, contract type, relevant completed projects, architect, engineer and quantity surveyor.

The value: gross development value supported by comparable sales evidence with Land Registry prices, dates and addresses, not by asking prices or an agent’s letter.

The money: total costs, the developer’s equity contribution and where it sits today, and the facility required.

The exit: sales, refinance or a mix, with a realistic timetable and a plan for a slow market.

The borrower: the special purpose vehicle, its ownership, the directors and their experience, and their position on personal guarantees.

That is roughly a 20 page document with appendices. Producing it takes a week. Not producing it costs months, because the case goes out incomplete, comes back with questions, and arrives at credit looking uncertain.

How does a broker decide which lenders see the case?

By elimination, mostly, and the reasoning is worth seeing because it is the part of property development finance broking that looks like nothing from outside.

Start with the hard filters. Facility size, because lenders have minimums and maximums and a case below or above them is wasted effort. Region, because plenty of businesses that finance development work only in certain parts of the country. Scheme type, because a lender who writes residential housing all day may not touch commercial or mixed use property. Gearing, because a case needing 70 percent of gross development value eliminates every lender who stops at 60.

Those four filters typically take a panel of over 100 lenders down to twenty or thirty for any given case.

Then the soft filters, which are the ones a developer cannot apply alone. Which of those lenders is actually writing property development finance this quarter rather than nominally open. Which has just filled up on this scheme type or in this city. Which has changed its credit policy since the last published criteria. Which will take a first time developer with a strong contractor. Which is fast on drawdowns and which is slow. Which restructures sensibly when a build runs late.

That takes twenty or thirty down to four to six, and those are the lenders who see the case.

The last step is sequencing. Property development finance offers are not all worth the same amount of the developer’s time. A broker will usually go to the likely winners together, hold one or two in reserve, and avoid papering the whole market at once, because a case that has visibly been everywhere is a case credit committees treat with suspicion.

Two things fall out of this that are worth a developer knowing.

First, the shortlist is a claim you can test. Ask a property development finance broker to name the lenders they intend to approach and to say why each one fits. A broker who has done this work can answer in a minute. One who intends to email a panel list cannot.

Second, the same case genuinely does get different answers from lenders that look identical on paper. Two specialist property finance businesses with the same published maximum of 70 percent of gross development value, the same minimum loan and the same regional coverage can differ by more than a point of margin and a full point of arrangement fee, because one is chasing deployment and the other is not. That is not information any developer can obtain from a website, and it is most of what the panel relationship is for.

Is a property development finance broker regulated?

Worth addressing plainly, because the answer surprises people and it affects who you can use for what.

Nearly all property development finance is unregulated commercial lending. The borrower is a business, usually a special purpose company, the property is being built to sell or to let rather than to live in, and the loan is for a business purpose. Unregulated lending sits outside the consumer protection regime, which is why terms are negotiable, why criteria vary so widely between the businesses that finance development, and why the documentation is heavier.

The exception is where a scheme involves a property the borrower or a close family member will occupy. A self build on a plot where you intend to live is a consumer transaction, and those cases sit with firms holding the relevant permissions.

Construction Capital is not authorised by the FCA. We are a commercial finance broker and introducer, working in the unregulated development and property finance market, and where a deal is a regulated activity we arrange it through lenders who hold the relevant FCA permissions.

The practical consequence for a developer is that due diligence on your intermediary falls to you. There is no register to check for the unregulated market in the way there is for consumer mortgages. So ask about completed volume, ask for the fee basis in writing, ask which lenders they place with, and ask to speak to a developer they have funded. Those four questions do more than any badge.

What should you ask a broker before instructing one?

Six questions, and the answers tell you most of what you need.

How many development cases have you completed in the last year, and at what sizes. Volume is what produces the pattern recognition you are paying for.

How are you paid, by whom, and does the procuration fee vary between lenders.

Which lenders will you approach with this, and why those. A broker who cannot name a shortlist and give reasons has not thought about your case yet.

What do you think the weaknesses are. A broker who sees none has not read the file.

What will you do if the valuation comes in below the appraisal. This is the most likely thing to go wrong, and the answer reveals whether they have handled it before.

And what would you tell me if I should not do this scheme. The answer to that one is the whole relationship.

What changes when a developer has several schemes running at once?

Quite a lot, and this is where a property development finance relationship stops being about one deal.

A developer with one site has one facility. A developer with four has four sets of development loans at different stages, each with its own drawdown cycle, its own maturity date and its own exit, plus whatever bridging loans are sitting in front of the next acquisitions. The finance stops being a series of transactions and becomes a position.

Three problems appear at that point.

Cross default is the first. Property development finance agreements routinely include provisions that trigger on default under the borrower’s other loans, so a problem on scheme two can put schemes one, three and four into technical default. Nothing has gone wrong on those sites. The paperwork simply links them. Managing which lenders hold which loans, and on what cross default terms, becomes a real part of the job.

Concentration is the second. A lender who has funded three of your schemes may decline the fourth purely on exposure to one borrower, regardless of how well the first three are going. That is not a judgement on you. It is a portfolio rule, and the answer is to spread the funding across more than one relationship before you need to rather than after.

Capital recycling is the third and the most important. A portfolio developer’s constraint is rarely the availability of property development finance. It is equity. Every scheme needs 10 to 35 percent of total costs in cash, and that cash is locked in until units sell. Four schemes running at once means four lots of equity tied up, and the pipeline stalls not for want of loans but for want of the developer’s own money.

That is what development exit finance is really for. Refinancing a completed scheme onto a facility at up to 75 percent of value, from 0.55 percent a month, releases the equity from units already sold while the remainder are still on the market. The capital comes back into the business months earlier than it otherwise would, and it funds the deposit on the next site. Pipeline developers use it as a standing tool rather than as a rescue.

There are structural answers too. Some lenders will write a facility across multiple sites for an established developer, which reduces the administrative load and often improves pricing. Some will agree a funding line with pre-agreed terms for future acquisitions, which is a substantial advantage when bidding for land against developers who have to arrange property finance deal by deal.

The broker’s role changes accordingly. On a single scheme the job is to place one case well. On a portfolio it is to manage where the loans sit, keep two or three lender relationships warm rather than one, watch the maturity dates against the sales pipeline, and keep the equity moving. That is closer to treasury work than to broking, and it is the reason experienced developers value a property finance relationship that has lasted several cycles over whoever quotes the keenest margin this month.

One warning that applies specifically to growing developers. The temptation when schemes are selling well is to gear up across the whole portfolio at once, taking every facility to the top of the range and adding mezzanine behind it. That works while values rise and sales are quick. When the market slows, every scheme hits its maturity at the same time, and refinancing four highly geared positions simultaneously is far harder than refinancing one. Staggering maturities and keeping one scheme deliberately under-geared is unglamorous and it is what keeps development businesses alive through a downturn.

Every figure in this article is indicative, varies by lender and scheme, and is never an offer of finance. The Bank of England base rate has been held at 3.75 percent since December 2025, and development margins on our lender panel sit over each lender’s own funding cost rather than tracking base rate.

If you have a scheme to place, we take a development case to market across a panel of over 100 lenders, and we will tell you when the numbers do not support it. Where senior debt leaves a gap, mezzanine finance is the next layer. Where the finished scheme is being held and let, the exit is commercial mortgages. Where the build is finished and units are still selling, development exit finance buys the sales window. For a purchase ahead of consent, bridging loans come first.

Construction Capital is a trading name of Lenzie Consulting Ltd, registered in England and Wales, company number 08174104. We are a commercial finance broker and introducer, not a lender, and we are not authorised by the FCA. Rates and terms are indicative, vary by lender and deal, and are never an offer of finance. Written by Matt Lenzie.