Taking your first steps into property development is exciting, but it can also feel a little overwhelming—especially when it comes to securing the right funding. Development finance is often the key to getting your project off the ground, but understanding how it works and what lenders expect can save you time, money, and a lot of stress.

At Cotterell & Cotterell Commercial Finance, we work with first-time developers across Bath and beyond, helping them find the right finance for their projects. If you’re just starting out, here are our top tips for navigating development finance with confidence.

What is Development Finance?

Development finance is a short-term loan designed to help fund the costs of building, renovating, or converting property. It’s different from a standard mortgage because it’s specifically tailored for development projects.

The loan is usually released in stages, known as “drawdowns”, as the work progresses. This ensures you have the money when you need it while keeping costs under control.

Tips for First-Time Developers

1. Get Your Figures Right

Lenders will want to see a clear breakdown of your costs before approving finance. This includes:

• Land purchase price
• Build costs (materials and labour)
• Professional fees (architects, surveyors, legal costs)
• Contingency fund (typically 10-15% for unexpected costs)

Having accurate figures will show lenders you’ve done your homework and reduce the risk of funding gaps later.

2. Know Your Exit Strategy

An “exit strategy” is how you plan to repay the development loan. Lenders will want to know whether you intend to:

• Sell the property once completed
• Refinance onto a long-term mortgage and rent it out

Having a clear, realistic plan in place reassures lenders that you’ll be able to repay the loan when the time comes.

3. Don’t Overstretch Yourself

It’s easy to get carried away with ambitious projects, but lenders favour developers who take a sensible approach. Start with a smaller project, such as converting a single property or a light refurbishment. Proving you can complete a project successfully will help you secure larger loans in the future.

4. Understand Loan-to-Cost (LTC) and Loan-to-Gross Development Value (LTGDV)

Lenders assess development finance based on:

• Loan-to-Cost (LTC): The percentage of your development costs the lender will cover. Typically around 70-80%.
• Loan-to-GDV (LTGDV): The percentage of the property’s final value that the lender is willing to fund. Usually around 60-70%.

Knowing these figures can help you work out how much you’ll need to contribute upfront and avoid funding shortfalls later.