Property development requires substantial funding and many developers and investors find themselves caught between the limitations of traditional mortgages and the strict criteria of standard development finance.
That’s where bridging loans for property development can work.
You might be planning to convert an office building into flats, build new homes from scratch, or transform a commercial space into modern apartments. Whatever your development goals, bridging finance offers a quick and flexible funding option that can help with simpler developments.
These loans are designed for short-term use and can help you take action when opportunities arise.
Let’s look at how development bridging loans work, who can use them, and what you’ll need to get started. We’ll cover everything from basic requirements to application processes, helping you decide if this type of finance suits your development plans.
What is Development Bridging Finance?
Development bridging finance is a short-term loan secured against property and land, designed specifically for construction and renovation projects.
These loans provide staged funding throughout your project. You could borrow between £150,000 and £25 million, depending on your plans and the projected value of your completed development.
You’ll receive the money in phases as your project progresses, which helps manage costs and reduces the interest you pay.
These loans work well for various projects, including:
- Converting commercial buildings into residential units
- Major house renovations and extensions
- Small-scale new build developments
- Property refurbishments before sale
The amount you can borrow depends on both the current property value and the estimated value after development – known as the Gross Development Value (GDV). Lenders often advance up to 70-75% of the current property value, plus your construction costs.
Who Can Use Development Bridging Finance?
You don’t need years of property experience to qualify for development bridging finance.
Lenders look at each application individually, focusing on your project’s merit and your ability to complete it successfully.
Established property developers often use these loans to fund multiple projects or seize time-sensitive opportunities. For example, a developer might use bridging finance to buy and convert a row of shops into flats while their capital is tied up in other developments.
If you’re a first-time developer, you’ll find some lenders are happy to support your project if you show solid planning and bring in experienced contractors. Many successful developers started with a single property renovation funded through bridging finance.
Buy-to-let landlords moving into development represent another key group. You might own several rental properties and spot an opportunity to convert a large house into flats. Your experience managing property projects, even if smaller in scale, counts in your favour.
Both individuals and companies can apply for development bridging loans.
Limited companies, partnerships, and SPVs (Special Purpose Vehicles) are all welcome. Some property investors create separate companies for each development project, which can offer tax advantages and help manage risk.
The main requirements focus on:
- Your exit strategy (how you’ll repay the loan)
- The project’s viability
- The property’s location and potential
- Your team’s combined experience
A recent client, previously a buy-to-let investor, secured their first development loan to convert a Victorian house into three flats. Despite being new to development, they got approval by partnering with an experienced architect and building team.
Read more: Getting a Bridging Loan Through Your SPV
Let’s talk bridging loans!
What Can Development Bridging Finance Fund?
Development bridging finance can support a wide range of property projects, from basic renovations to complete new builds.
You’ll find these loans particularly useful when you need quick access to funds or want more flexibility than traditional lending offers.
For ground-up developments, you can borrow money to buy land and fund the construction process.
Take a recent project in Liverpool where a developer used an £800,000 bridging loan to build three new houses on a vacant plot. The loan covered both the £300,000 land purchase and £500,000 in building costs.
Major renovations form another key use. You might buy a run-down property for £450,000 and need £150,000 for comprehensive improvements. These projects often involve updating everything from wiring to windows, adding extensions, or completely reconfiguring internal layouts.
Conversion projects remain popular, especially with changes to planning rules making it easier to transform commercial buildings into homes.
A bridging loan could help you turn an old office building into apartments or convert a large house into several flats. One London developer recently converted a former pub into four apartments using a £750,000 bridging loan.
Mixed-use developments combine commercial and residential spaces in one project. You might renovate a shop with flats above, keeping retail space on the ground floor while creating new homes upstairs. These projects often need flexible funding as work progresses on different parts of the building at different times.
The amount you can borrow depends on your project’s specifics, but lenders often consider:
- The current property value
- Building costs and timeline
- Expected value after completion
- Your experience level
- Local market conditions
Each project needs a tailored funding approach. A broker can help structure your loan to match your development’s particular requirements and timeline.
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Finance Requirements
Getting approved for development bridging finance comes down to several key factors, with the property itself being the main security for your loan.
You’ll need enough equity in the property to cover the loan amount, which usually means having a cash deposit of 25-30%.
Planning permission influences what you can borrow. While some lenders will provide loans before planning is granted, you’ll get better terms, and choice, with permission in place.
For instance, if you’re planning to convert a commercial building into flats, having full planning approval could mean borrowing up to 75% of the purchase price plus all of the building costs.
Your experience level does matter, but don’t let this put you off.
Even as a first-time developer, you can strengthen your application by bringing in proven contractors and architects. A builder turning property developer recently secured funding by partnering with an experienced project manager who had completed similar conversions.
As always, the exit strategy – how you’ll repay the loan – needs careful thought.
Lenders want to see evidence that you can either sell the development or refinance onto a long-term mortgage. You’ll need to show local market research, sales values of similar properties, and a clear timeline.
When you apply, prepare these documents:
- Details of the property and proposed works
- Cost breakdowns from your contractors
- Planning permission documents
- Project timeline
- Proof of your deposit
- Details of your professional team
- Evidence of your exit strategy
A specialist broker can help you prepare a strong application package, making sure you’ve covered everything lenders need to see. They’ll also know which lenders best match your specific project requirements.
Read more: Exit Strategies for Property Developers
Alternatives to Development Bridging Finance
While bridging loans are flexible and work well for many development projects, you might want to consider other funding options too.
Let’s look at how these alternatives could suit different situations.
Property development finance
Development finance offers a longer-term solution, usually running from 12 to 36 months, for larger building projects. A developer in Birmingham chose this route for a large apartment block project, borrowing £2 million over 24 months. The longer timeline meant less pressure to sell quickly, but the application process took several weeks longer than bridging finance would have.
Commercial mortgages
Commercial mortgages suit completed projects where you plan to keep the property long-term. You’ll find these useful for developments like retail units with flats above, where you want to retain and rent out the completed project. The rates are lower than bridging loans, but you’ll need a strong trading history to qualify.
JV Funding
Joint venture funding brings in investment partners who share both risks and rewards. A London developer recently paired with an investor to convert an old factory into workspace units. The investor provided 50% of the costs in exchange for a share of the profits. This reduced the amount they needed to borrow but meant sharing control of the project.
Capital raising finance
If you want to be more in control of when the funding becomes available to you, it may be possible to raise the money against other assets. This could involve:
- Second charge bridging against investment properties
- Lombard loans where an investment portfolio is the collateral
- We even have providers that lend against Bitcoin and Cryptocurrency
Each option has its place. Your choice might depend on:
- How long you need the money
- Whether you plan to sell or keep the property
- How quickly you need the funds
- Your experience level
- The size of your project
When Would Development Exit Finance Be Used?
Development exit finance becomes useful when you’ve nearly completed your project but need more time or flexibility with your funding.
Think of it as a way to refinance your original development loan when you’re about 90% finished with the building work.
You might use this type of finance when:
Your original loan is ending but you’re still selling units.
For example, a developer in Yorkshire had completed an eight-flat conversion but had only sold five units. Exit finance gave them more time to sell the remaining flats at full market value rather than reducing prices for quick sales.
Building work took longer than planned.
Bad weather, supply delays, or contractor issues can push timelines back. One London developer used exit finance when their office-to-residential conversion ran three months over schedule due to unexpected structural issues.
You want to release some equity early.
Perhaps you’ve finished the project but want to start another development before selling all units in the first one. Exit finance can help you access some of your profit to reinvest while maintaining control over sales timing.
You’re waiting for better market conditions.
Sometimes the property market slows just as you’re completing your development. Exit finance gives you breathing space to wait for the right time to sell, rather than being forced to accept lower offers.
The benefits often include:
- Lower interest rates than your original development loan
- More time to achieve the best sale prices
- Chance to release some equity for your next project
- Flexibility on repayment terms
A recent client used development exit finance on their completed apartment block. Their original loan was due to end, but they had two units left to sell. The exit finance saved them money on interest payments while giving them three extra months to secure full-price sales.
How a Broker Helps with Development Bridging Finance
A broker’s market knowledge and lender relationships will make a real difference to your development finance strategy.
Think of them as your personal guide through the lending landscape, someone who knows exactly which lenders will suit your specific project.
Many development finance lenders don’t work directly with borrowers.
A recent client found this out after approaching several lenders independently without much success. Once they worked with a broker, they accessed a range of options they hadn’t known existed, securing a loan that perfectly matched their needs.
Brokers understand how to present your case effectively. When a first-time developer wanted to convert a commercial building into flats, their broker highlighted relevant parts of their business background that helped secure approval. The broker knew which lenders would value this experience, even though it wasn’t directly in property development.
Your broker will also structure your application to match each lender’s specific requirements. They’ll know whether to emphasise the property’s potential value, your exit strategy, or your team’s experience, depending on what matters most to each lender.
Next Steps for Property Developers
Ready to explore development bridging finance?
Start by gathering information about your project. You’ll want details of the property, estimated costs, and your planned timeline. Put together a clear business plan showing how you’ll use the funds and repay the loan.
Speaking with a broker early in your planning helps you understand your options before making firm commitments. They can give you a realistic idea of costs and lending terms, helping you make solid decisions about your development project.
Remember to have basic details ready when you make that first call:
- The property’s current value
- Your planned works
- Your estimated costs
- Your preferred timeline
- Your exit strategy
FAQ
Most development bridging loans can be arranged within 2-3 weeks. Some lenders can move faster in urgent cases, especially if you have all documentation ready.
Not always. Some lenders offer pre-planning bridging loans, but you’ll get better terms and a wider choice of lenders with permission in place.
Common exit strategies include selling the developed property, refinancing to a term mortgage, or using confirmed investment funds.
Read more: Bridging loan exit strategies
Our lending starts from £150,000, with no standard upper limit. The amount depends on property value and development costs.
The development property itself serves as primary security. Some lenders might require additional security for higher loan amounts.
Yes, these conversions are common uses for development bridging loans, especially with current planning rules.
Read more: Financing Your Commercial to Residential Conversion
While not mandatory, brokers can access more lenders and often secure better terms, especially for complex developments.
Terms typically range from 6-24 months, with some lenders offering up to 36 months.
Yes, limited companies, LLPs, and SPVs can all apply for development bridging finance.
Read more: Getting a Bridging Loan Through Your SPV
