Development finance lenders will often fund up to 100% of build costs when the borrower provides land as security
Development finance lenders will often fund up to 100% of build costs when the borrower provides land as security—meaning no additional cash is required for construction.
Development finance lenders will often fund up to 100% of build costs when the borrower provides land as security—meaning no additional cash is required for construction.
In the UK development finance sector, lenders assess risk based on two primary metrics: Loan to Cost (LTC) and Loan to Gross Development Value (LTGDV). A common structure for ground-up development is for the lender to provide 60–65% of the initial land purchase price, and then fund 100% of the ongoing construction costs.
This structure is highly advantageous for developers because it minimizes their cash contribution during the risky build phase. The 100% build cost facility is not released upfront; instead, it is drawn down in tranches. An independent Quantity Surveyor (QS) visits the site monthly to certify the value of the works completed before the lender releases the next tranche of capital. As long as the developer holds sufficient equity in the land and the overall loan remains within the maximum LTGDV threshold (typically 65%), they can build out the entire project without injecting further personal cash.