First Time Developer Finance: What a Lender Wants Instead of Track Record

Development finance is priced on construction risk, and one of the ways lenders assess construction risk is by looking at what the developer has already built. On a first project there is nothing to look at, which leaves a hole in the underwriting that has to be filled some other way.

That is the whole problem, and it is worth stating precisely because first time developers usually misdiagnose it. The obstacle is not that lenders dislike newcomers. It is that a lender needs evidence that this project will be delivered for the money and in the time stated, and completed schemes are the cheapest form of that evidence. Take them away and you have to supply the evidence from somewhere else.

Supply it well and a first scheme is fundable across a decent slice of the market. Fail to, and you get declines that never explain themselves.

Why does experience weigh so heavily in development lending?

Because of what the lender is exposed to between drawdown and completion.

Development finance is released in tranches against a monitoring surveyor’s certificates. From the first drawdown until practical completion the lender is holding a debt secured on a half finished building, which is worth considerably less than either the site it started as or the property it will become. If the project stops at that point, the lender’s options are all bad.

Experience is a proxy for the probability of stopping. A developer with four completed projects has demonstrated that they can cost a build, appoint a contractor, run a programme, deal with the surprises, and finish. That demonstration is expensive to obtain and impossible to fake, which is why lenders lean on it.

Two things follow for first time developers.

The first is that this is a risk assessment rather than a prejudice. Nobody at a credit committee is being snobbish about newcomers. They are pricing the chance that a project stalls, and they have data on it.

The second, more useful, is that experience is not the only evidence of deliverability. It is just the most convenient. Anything else that reduces the probability of the project stopping does the same job, and the rest of this article is about what those things are.

What can stand in place of a track record?

Five things, and a strong first application uses all of them together.

A named main contractor with relevant completed work, on a fixed price contract. This is the single most powerful substitute, and the reason is straightforward: if the contractor has built twelve schemes like yours, somebody on the project has the experience even though the developer does not.

A quantity surveyor’s cost plan rather than a builder’s estimate. A properly costed build with a contingency inside it tells a lender the number has been tested by someone with professional liability attached to their opinion.

A project manager or contract administrator with authority. Somebody whose job is to say no to variations, hold the programme and manage the contractor. On a first project this role is often the difference between a scheme that runs and one that drifts.

Lower gearing. Putting more of your own money in reduces the lender’s exposure directly, and a first time developer at 60 percent of gross development value is a materially easier case than the same person at 70 percent.

Relevant adjacent experience. A builder becoming a developer, a surveyor becoming a developer, an architect becoming a developer, or someone who has run refurbishment projects moving up to a ground up scheme: all of these count for something, and all of them should be spelled out in the application rather than left for a lender to infer.

None of these is a trick. Each one genuinely reduces the chance of the project failing, which is exactly why it earns credit.

How does the contractor carry the experience you do not have?

Worth going into properly, because first time developers often treat the contractor as a cost line rather than as the centre of the application.

A lender assessing your builder is asking four questions. Have they built this kind of thing before, at this scale. Are they financially sound enough to survive the project. What is the contract type, and does it put the cost risk on them or on you. And is there a mechanism if they fail.

Contract type matters more than developers expect. A fixed price contract places the cost overrun risk with the contractor, which is what a lender wants to see on a first scheme. A cost plus or open book arrangement places it with you, which is fine for an experienced developer managing a complex build and alarming on a first project.

Contractor solvency matters too. Building companies fail, and a contractor failing mid-project is one of the most damaging things that can happen to a first time developer, because you then have to procure a replacement to finish someone else’s work at whatever the market charges. Lenders check accounts. You should too, and a collateral warranty and a performance bond are worth asking about even where they are not insisted on.

The awkward case is the developer who intends to build it themselves, or to manage trade packages directly. This is entirely legitimate and it removes your strongest piece of evidence at the moment you most need it. If that is your plan, expect a narrower set of lenders, lower gearing and more questions, and consider whether appointing a contract administrator recovers enough of the position to be worth the fee.

Which first projects get funded, and which do not?

Simplicity is the dividing line, more than size.

Fundable first projects tend to look like this. Two to six residential units. A flat, clean site with no basement, no complex groundworks and no demolition beyond the straightforward. Detailed planning consent already in place with conditions that can be discharged. A location with active comparable sales evidence, so the gross development value is easy to support. A conventional specification. And a scheme where the numbers work with room to spare.

Difficult first projects look like this. Apartment blocks, where absorption risk on the exit is higher. Anything with meaningful commercial content, because the value depends on letting rather than on selling. Conversions of older buildings, where the unknowns behind the fabric are exactly the kind of surprise a first time developer has never dealt with. Sites with unusual access, contamination or level changes. Schemes where the margin is thin. And listed buildings, which combine every difficulty at once.

That does not mean a hard first project cannot be funded. It means the other evidence has to be correspondingly stronger, and the pricing will reflect it.

There is a strategic point buried here. If you have a choice of first project, choosing the boring one is worth real money. A simple scheme funded at good gearing that completes on programme creates the track record that makes the interesting scheme fundable next time. Starting with the interesting one frequently means not starting at all.

What gearing should a first time developer expect?

Below the ceiling, and it is better to plan for that than to be disappointed by it.

Senior development finance runs to 65 to 70 percent of gross development value across our lender panel. On a first project, expect to be offered something closer to 60 percent, and expect loan to cost to be capped tighter as well.

Work it through on a small first scheme. Two semi detached houses. Land at £250,000, build cost of £420,000 including a 10 percent contingency, professional fees of £35,000. Gross development value of £820,000.

Total project costs are £705,000. Add rolled up interest of about £34,000 over a 15 month programme at the bottom of the range and £22,000 of fees, and the facility required is £761,000. That is 93 percent of gross development value, far above anything available.

At 60 percent the facility is £492,000. At 65 percent it is £533,000. So the developer needs £228,000 to £269,000 of their own money, most of which goes into the land at completion because the day one advance against a site typically runs 50 to 65 percent of its value.

That is the real shape of a first project, and it is why the honest constraint on most first time developers is equity rather than lending. A first scheme is not a way to get into property without capital. It is a way to deploy capital you already have.

How much cash does a first scheme actually need?

More than the equity figure, and this is the calculation that catches people.

The equity contribution is the first number: £228,000 or so on the scheme above, plus stamp duty and acquisition legals on the land.

The cash flow gap is the second, and it does not appear in any appraisal. Development finance pays after the work, not before it. You pay the contractor, the monitoring surveyor visits, the certificate is issued, the lender releases. Two to four weeks pass every cycle. On a scheme drawing £40,000 a month you are carrying roughly a month’s spend at all times, and more where you have paid deposits for materials that will not be certified until they are fitted.

The contingency is the third. Ten percent of build cost is inside the facility on a well structured deal, but a lender that requires you to fund a projected overrun in cash before releasing further money has effectively asked you to hold it in reserve anyway.

Your own living costs are the fourth. A 15 month project is 15 months during which the developer is not being paid by the project. First time developers who give up an income to do this frequently forget to fund themselves.

Add those together and a first project with a £492,000 facility realistically needs £280,000 to £320,000 of accessible cash across its life. Working that out before you buy the land is the difference between a project and a problem.

How does property development finance actually reach you on a first scheme?

Understanding the plumbing matters more on a first project than on any later one, because it is where the surprises live.

Property development finance does not arrive as a loan into an account. It arrives as a series of releases, each one triggered by an inspection. On the two house scheme above the sequence runs like this.

At legal completion the lender advances the land tranche, roughly £150,000 against a £250,000 plot, and the developer funds the balance plus stamp duty. A first legal charge is registered over the property, held in a special purpose company. Interest starts accruing on the drawn balance only, which on day one is that £150,000 rather than the whole facility.

Then nothing happens for four to eight weeks. Site setup, enabling works and professional fees are being paid out and nothing has been built that anyone can measure, so no drawdown is available. Every first time developer is surprised by this dead zone and it is entirely predictable.

From then on the cycle repeats monthly. Work is done. You request a drawdown. The lender instructs its monitoring surveyor, who visits, measures completed work against the cost plan and certifies a figure. The lender releases against that certificate, typically within three to five working days.

Two things about that cycle deserve emphasis for anyone doing it for the first time.

The surveyor certifies work in place, not money spent. Materials stacked on site are discounted or excluded. Supplier deposits are not certified at all. If you have paid £18,000 up front for windows, that £18,000 comes back when the windows are fitted and not before.

And the surveyor is the lender’s appointment, paid for by you, reporting to the lender. They are not there to help you. A good one is still the most useful early warning system a first time developer will get, because a surveyor flagging a cost problem at month three has handed you a year to deal with it.

The practical lesson is that property development finance rewards a build that runs to plan and punishes one that does not, and the punishment arrives as a cash flow problem long before it arrives as a cost problem.

What exit does a first development project need?

Every property development finance facility is written against an exit, and on a first scheme the exit gets tested harder than anything else in the application.

There are three, and only two of them realistically apply to a first project.

Sale of the units is the standard exit. Each completion releases the lender’s charge on that plot against an agreed minimum price, and the proceeds pay the loan down. The lender will test your prices against comparable evidence, will discount optimism, and will assume the sales take longer than you have assumed.

Refinance onto term debt is the second, where the developer intends to hold and let. This exit depends on the finished property passing a different lender’s affordability or interest cover test, and a first time developer relying on it should confirm that test is passable before the build starts rather than after.

A sale of the whole scheme to an institution is the third, and it is rarely available at the size a first project operates at.

Now the part worth planning for. The exit is the most likely thing to go wrong, because it depends on a market rather than on your own effort. If the two houses are finished and not selling, the facility matures and the pressure to discount arrives fast.

Three responses. Discount, which takes the loss straight out of your profit because the debt does not shrink when the price does. Extend the property development finance facility, at the lender’s discretion, for a fee of 0.5 to 1 percent plus a margin uplift. Or refinance onto development exit finance at up to 75 percent of value, from 0.55 percent a month, which buys a sales window of 6 to 18 months and releases equity from any unit already sold.

For a first time developer the useful discipline is to model the slow case before committing. If the project only works when both houses sell within eight weeks of completion, it is a bet rather than a scheme. If it survives a six month sales period with the funding costs that implies, you have something a lender will recognise as considered, and saying so in the application does more for your credibility than any amount of enthusiasm about the site.

What do first time developers most commonly get wrong?

Six things, in the order we see them.

Buying the site first and arranging the funding afterwards. The land price should be a residual: gross development value, less build costs, less finance and fees, less the profit you need, and what remains is what the site is worth to you. Developers who compete on price and work backwards afterwards discover that the scheme was never fundable at that land value.

Costing the build from a rate per square foot. It is a useful sanity check and it is not a cost plan. Lenders and their monitoring surveyors will not accept it, and neither should you.

Carrying five percent contingency because ten percent made the appraisal look bad. The appraisal is not the point. Finishing the project is.

Assuming the developer’s own gross development value. Valuers test unit prices against comparable evidence and report conservatively, and a first project priced at the top of the local range will come back lower.

Underestimating time. Planning conditions take longer to discharge than expected, contractors mobilise later than promised, and sales take longer than the appraisal assumed. Interest accrues through all of it.

And treating the finance as a commodity to be bought at the lowest rate. On a first scheme the drawdown speed, the cost overrun clause and the lender’s behaviour when a programme slips matter more than a quarter point of margin.

Which lenders will look at a first project?

Not all of them, and knowing which in advance saves weeks.

Clearing banks generally will not. Their credit processes want an established development business with filed accounts and completed projects, and a first application rarely gets past that.

Specialist development finance businesses often will, on conditions: a named contractor, a professional cost plan, lower gearing and a simple scheme. This is where most first projects are funded.

Debt funds will, at a price, particularly where the professional team is strong. A fund prices risk rather than screening for relationship, which sometimes makes it more accessible to a newcomer than a cheaper lender would be.

Peer to peer platforms will fund smaller first schemes, though funding certainty is the thing to check.

Mezzanine providers will sit behind a senior lender at around 12 percent a year, taking the stack to 85 to 90 percent of gross development value. On a first project this is available but expensive, and it should be a considered choice rather than a way to avoid putting equity in.

The common thread is that the lenders who take first projects are pricing the scheme and the team rather than the borrower’s history. Present those two things properly and the market is more open than its reputation suggests.

Is bridging a better first step than a development facility?

Sometimes, and for two quite different reasons.

The first is sequencing. If you are buying a plot without detailed consent, or at auction on a 28 day deadline, no development lender can act in time. Bridging loans complete quickly, run 1 to 18 months from 0.55 percent a month, and lend up to 75 percent loan to value on residential security. You buy the site, obtain consent, and refinance onto development finance. The bridging interest is a project cost and belongs in the appraisal from the start.

The second is scale. A refurbishment or a light conversion funded on bridging or refurbishment finance is a smaller, shorter, simpler project than a ground up build, and completing one is a genuine piece of track record. A developer who has taken a tired house, refurbished it, and sold or refinanced it profitably has evidence to show. It is not the same as a ground up scheme and it is a great deal better than nothing.

That is worth saying plainly to anyone planning their entry into property development. The fastest route to good development finance terms is not to find a lender who will take a chance on an unproven developer with a large first scheme. It is to do a small project properly, finish it, and become someone with a track record.

Should a first time developer use a broker, and how do you compare offers?

On a first scheme the case for an intermediary is stronger than at any other point in a developer’s career, for one specific reason: you do not yet know which lenders will look at you.

An experienced developer knows their market. A first time developer approaching lenders directly will reach three or four, and if two of those happen to be businesses that never fund first projects, the conclusion drawn is that property development finance is unavailable. It is not. It was the wrong three lenders.

There is a second reason, which is presentation. Lenders decline what they cannot assess, and first applications are declined for missing information more often than for genuine weakness. A submission with a quantity surveyor’s cost plan, a named contractor, a real contingency, evidenced comparable sales and a modelled exit gets priced. One without gets a polite no that never explains itself, and the developer learns nothing from it.

What a broker cannot do is change the arithmetic. If the scheme needs 90 percent of gross development value and the market ceiling is 65 to 70 percent, no amount of placing fixes it. Good property development finance advice on a first scheme frequently consists of telling someone the land is too expensive, and that advice is worth more than the fee.

On comparing offers, the instinct is to rank by interest rate and the instinct is wrong. Compare total cost of funding across your real programme, and compare the terms that decide behaviour.

Total cost means interest on the actual drawdown profile, the arrangement fee at 1 to 2 percent of the facility, any exit fee and whether it is charged on the loan or on gross development value, the monitoring costs across the build, and legals on both sides. Two property development finance offers with the same headline rate can differ by tens of thousands once those are added up, and the ranking often flips depending on how long you borrow for.

The behavioural terms matter as much on a first project. How many days between certificate and release. How often can you draw. What the cost overrun provision requires and when. What the minimum release prices are on each unit. And what extension actually costs if the programme slips, because on a first scheme the programme slipping is the most likely thing that will happen.

One last piece of practical sequencing. Get indicative terms from several lenders on paper before commissioning a valuation, because valuations are rarely transferable between lenders and paying for two is an avoidable cost on a budget that has no room in it.

How do you build a track record on purpose?

Three deliberate moves.

Start smaller than your ambition. A two unit scheme completed on programme is worth more to your next application than a six unit scheme that ran a year late.

Document everything as you go. Final accounts against the original cost plan, the programme as built against the programme as planned, photographs, the sale prices achieved against the appraisal. Lenders assessing your second project want evidence, and evidence assembled afterwards from memory is weak.

Keep the same team where it works. A developer who returns with the same contractor, the same quantity surveyor and the same lender on a second project is a much easier case than one who arrives with a new cast each time. Relationships compound in this business faster than capital does.

By the third scheme the conversation changes entirely. Lenders compete for a developer with three delivered projects behind them in a way they never compete for a first application, and the pricing, the gearing and the guarantees all move in your favour. For context on the wider cost of money while you plan, the Bank of England base rate has been held at 3.75 percent since December 2025, and development margins on our lender panel start from 6.5 percent a year over each lender’s own funding cost.

Which finance products will a first project touch, and in what order?

Newcomers tend to think of development finance as one product. A first scheme usually touches three, and knowing the order stops the expensive mistakes.

Bridging finance comes first where the land is bought before consent or at auction. From 0.55 percent a month, up to 75 percent loan to value on residential security, over 1 to 18 months. The trap here is treating the bridge as free time: nine months of bridging on a £250,000 plot at 0.75 percent a month is £16,875 of interest plus an arrangement fee, and on a small first scheme that is a meaningful slice of the profit. Price the bridging stage on a pessimistic planning timetable.

Development finance is the main facility. From 6.5 percent a year on our lender panel, up to 65 to 70 percent of gross development value, drawn in stages. The trap here is assuming the whole facility is available on day one. It is not, and the working capital to bridge the gap between paying builders and being paid by the lender is your problem rather than the lender’s.

Mezzanine finance sits behind the senior facility where the equity does not stretch, from around 12 percent a year, taking the total to 85 to 90 percent of gross development value. The trap here is reaching for it as a substitute for having capital. On a first project, mezzanine is expensive money on top of an already geared position, and a scheme that only works with it is a scheme with no margin for error.

Development exit finance comes at the end if the units are still selling when the facility matures, at up to 75 percent of value from 0.55 percent a month. The trap here is leaving it too late, because it needs equity in the scheme to work.

Refurbishment finance is the alternative to all of the above for a first project that is a renovation rather than a build. Light refurbishment from 0.65 percent a month, heavy refurbishment from about 0.75 percent a month, up to 75 percent loan to value over 6 to 18 months. For many newcomers this is the sensible entry point, and heavy refurbishment behaves like development lending in that it draws in stages against a monitoring surveyor.

The order matters because each product’s terms constrain the next. Bridging finance with a term too short to cover the planning process leaves you refinancing under pressure. Development finance sized without the bridging interest in the total costs understates what you need. And an exit facility considered only after the units have sat unsold for four months is being arranged from a position of weakness.

Map the whole sequence at appraisal stage, before the land is bought. It takes an afternoon and it is the single most useful thing an aspiring developer can do with one.

Every figure here is indicative, varies by lender and by scheme, and is never an offer of finance.

If you have a first project and want an honest view before you commit to the land, we fund a first development project across a panel of over 100 lenders, and we will tell you when the numbers do not work. Where the equity gap is too large, mezzanine finance is the usual answer. For a site purchase ahead of consent, bridging loans come first. If a refurbishment is the better place to start, look at refurbishment finance.

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.