Development Finance Overview

Development Finance is used as a debt funding solution to aid with the purchase and construction costs of a development project. 

We lend to development projects that show a projected profit on costs of at least 15% (after all costs - interest and fees included).

Our interest rates for development loans start from 0.85% per month and we lend up to 70% LTGDV (Loan to Gross Development Value) / 85% LTC (Loan to Cost). The cost balance is made up of the developers equity and this can come in the form of cash equity, land value or land value uplift.

We require developers to invest their equity on ‘day-1’ with the balance of the development costs coming from us, the senior development lender. This typically means we finance 100% of the construction costs, the interest and fees for the term of the loan, and a portion of the land costs. Developers equity therefore is in the form of land equity.

We wrap up all of our interest and fees for the term of the loan. This ensures the scheme is fully funded and provided the scheme is delivered on time and on budget etc the developer will not need to invest any further cash equity into the scheme.

Our development finance terms typically range from 12-36 months depending on the project. The term is made up of the pre-construction, construction and sales void / sales period phases (or refinance).

Borrowers are mostly limited companies with some being individuals. When a borrower is a limited company, we will require personally guarantees and a company debenture to serve as additional security.

We require a RICS ‘red book’ valuation of the security property together with the projects gross develoment value. The valuation fee is payable by the borrower and the cost starts from £1,000.

In addition to the valuation, borrowers will required to pay for our legal fees. The amount ranges depending of the size and complexity but they typically start from £1,200.

Prior to the initial drawdown, and in addition to our standard loan due diligence, we will require a QS report to confirm the viability of the development project from a construction, regulation, deliverability and planning perspective. Ultimately, the QS report assesses the likelihood of the project being delivered any risks we the lender should know about.

We also require on-going monthly QS monitoring reports tied to each construction drawdown. We are looking for the QS to confirm the project is on time, on budget, and the construction loan funds are being invested into the scheme.

Once construction has been completed units are typically sold or refinanced with longer term debt. Our loan needs to be repaid in full prior to the developer releasing any equity for benefitting from the profits.

Property Development Finance Product

For more information about obtaining a bridging loan from us see our Property Development Finance page.

How can I apply for an property development loan?

To apply or discuss your bridging loan requirements, call us on 0207 459 4562 or email us at contact@teloscapital.co.

If your loan meets our lending criteria, we will start the application process. For more information about this process, see our Development Loan Application Process.

See our Development Finance FAQs for more information.