Development Finance: A Guide

Development finance refers to the funding and financial services provided to support the development, construction, or refurbishment of properties. It is typically used by property developers, real estate investors, and businesses engaged in construction projects. This type of finance is essential for enabling the development of residential, commercial, and industrial properties, and it plays a crucial role in urban development and regeneration.

How Development Finance Works

Development finance works by providing the necessary capital to fund the various stages of property development projects. These stages can include:

  1. Acquisition of Land or Property: Funding for purchasing land or existing properties for redevelopment.
  2. Pre-Construction Costs: Covering expenses such as planning, design, and securing permits.
  3. Construction Costs: Financing the actual building or refurbishment work.
  4. Post-Construction Costs: Supporting the costs associated with marketing and selling or leasing the developed property.

Uses of Development Finance

Development finance can be used for a wide range of property-related projects, including:

  • Residential Developments: Building new homes, apartments, or housing estates.
  • Commercial Developments: Constructing office buildings, shopping centres, or retail spaces.
  • Industrial Developments: Developing warehouses, factories, or industrial parks.
  • Mixed-Use Developments: Combining residential, commercial, and sometimes industrial spaces in a single project.
  • Property Refurbishments: Renovating and upgrading existing properties to improve their value and appeal.

Types of Development Finance

There are several types of development finance, each tailored to specific project needs and stages. Here are some of the most common types:

  1. Construction Loans

Construction loans are short-term, high-interest loans used to cover the costs of building a new property. These loans are typically disbursed in stages as the project progresses, with each stage requiring inspection and approval. Key features include:

  • Term: Usually 12-36 months.
  • Interest Rates: higher than traditional mortgages, reflecting the higher risk.
  • Repayment: Interest-only during construction, with full repayment due upon project completion.
  1. Commercial Property Finance

Commercial property finance is designed for the acquisition, development, or refurbishment of commercial properties. It can be structured as a term loan, a mortgage, or a line of credit. Key features include:

  • Term: Varies based on project size and scope.
  • Interest Rates: competitive rates, often variable.
  • Loan-to-Value (LTV): Up to 75% of the property’s value.

2. Development Exit Finance

Development exit finance is a type of short-term funding used to repay an existing development loan upon project completion but before the sale of the property. It provides developers with more time to sell the property at the best price without the pressure of immediate repayment. Key features include:

  • Term: Typically 3–18 months.
  • Interest ratesare lower than development loans.
  • Repayment: due upon the sale of the property or refinancing.

3. Property Refurbishment Finance

Property refurbishment financing supports the costs of renovating or upgrading existing properties. This can range from minor cosmetic improvements to major structural changes. Key features include:

  • Term: short- to medium-term, usually 6–24 months.
  • Interest Rates: higher than standard mortgages.
  • Loan Amount: Based on the projected increase in property value post-refurbishment.

4. Residential Property Finance

Residential property finance is aimed at funding the development or purchase of residential properties. It can include loans for new construction, buying existing homes, or refinancing. Key features include:

  • Term: long-term, up to 30 years.
  • Interest rates: fixed or variable.
  • Loan-to-Value (LTV): Up to 85–90%.

Costs of Development Finance

The cost of development finance varies depending on several factors, including the type of loan, the lender, the project’s risk profile, and market conditions. Typical costs associated with development finance include:

  • Interest Rates: Ranging from 5% to 15% per annum.
  • Arrangement Fees: Typically 1-2% of the loan amount.
  • Exit Fees: Often 1–2% of the loan amount is charged when the loan is repaid.
  • Legal Fees: Costs for legal services involved in setting up the finance.
  • Valuation Fees: Fees for property valuations required by the lender.
  • Monitoring Fees: Fees for project monitoring and inspections.

Applying for Development Finance

Applying for development finance involves several steps, including preparing detailed documentation and working closely with lenders. Here’s a step-by-step guide on how to apply for development finance:

  1. Prepare a Detailed Business Plan: Include project details, timelines, financial projections, and market analysis.
  2. Gather Required Documentation: This includes property plans, planning permissions, cost estimates, and your development experience.
  3. Choose the right lender: Research and select a lender that specialises in development finance and fits your project needs.
  4. Submit your application: Provide the lender with all necessary documents and information.
  5. Due Diligence and Valuation: The lender will conduct due diligence, including property valuation and risk assessment.
  6. Approval and Offer: If approved, the lender will provide an offer outlining the terms and conditions of the loan.
  7. Acceptance and Drawdown: Upon accepting the offer, funds will be released in stages as the project progresses.

Applying for Development Finance at Donkey Finance

To apply for development finance at Donkey Finance, follow these steps:

  1. Visit the Donkey.Finance website: Navigate to the development finance section of the DonkeyFinance website.
  2. Complete the online application form: Fill out the application form with your personal and project details.
  3. Submit Documentation: Upload necessary documents, such as project plans, cost estimates, and planning permissions.
  4. Consultation with a Finance Specialist: Schedule a consultation with a Donkey.Finance specialist to discuss your project and finance options.
  5. Receive a Tailored Finance Proposal: Based on your application and consultation, receive a customised finance proposal.
  6. Accept the Offer and Proceed: Review and accept the finance offer to proceed with your development project.


Development finance is a vital tool for property developers and real estate investors, enabling them to undertake various construction and refurbishment projects. By understanding the different types of development finance and their costs, developers can choose the best financing options for their projects. Applying for development finance, especially through platforms like Donkey.Finance, involves preparing detailed documentation and working closely with lenders to secure the necessary funds for successful project completion.