Ground-Up Development Finance: Requirements & Structures
You own or are buying a site, you have planning, and you want to build from nothing to a finished scheme. The funding product built for exactly that job is ground-up development finance. It is the archetypal development loan: money released in stages as the building goes up, sized against both what the scheme costs and what it will be worth when complete.
This guide explains what ground-up development finance is, how it differs from refurbishment finance and from a bridge, how much you can borrow, what it costs, and what lenders check before they commit. If you are completely new to development lending, start with What Is Development Finance?; this page focuses specifically on new-build, ground-up schemes.
What Is Ground-Up Development Finance?
Ground-up development finance funds the construction of a new building on a bare, cleared or demolished site, from foundations through to practical completion. Unlike a bridging loan, which releases the full amount upfront, a development loan is drawn down in stages as work is completed and certified, so you only pay interest on the money you have actually taken.
The structure reflects how a build actually happens. The lender usually funds the land purchase (or lends against land you already own), then releases construction funds in tranches: groundworks, superstructure, first fix, second fix, and completion. Each release is signed off by a monitoring surveyor who inspects the site and certifies that the work claimed has genuinely been done. The full mechanics of drawdowns, monitoring and how interest accrues are covered in How Development Finance Works.
Because the lender is funding an unbuilt scheme, ground-up finance carries more risk than most property lending, and it is priced and underwritten accordingly. That is also why the right broker and the right lender matter more here than almost anywhere else in property finance.
How It Differs From Refurbishment and Bridging
Ground-up development finance sits at one end of a spectrum of property build finance. It helps to see where it sits:
| Product | Typical use | How funds are released |
|---|---|---|
| Bridging loan | Purchase, chain break, light works | In full, upfront |
| Refurbishment finance | Upgrading or converting an existing building | Part upfront, part staged |
| Ground-up development finance | Building a new scheme from a cleared site | Staged against certified progress |
The key distinction is the scale of construction and the level of monitoring. A light refurbishment might need one or two drawdowns and little oversight. A ground-up scheme involves a full build programme, a professional team, and ongoing surveyor certification at every stage. Lenders treat it as a distinct product with its own criteria, not simply a larger bridge.
How Much Can You Borrow?
Ground-up lenders size the loan using two ratios, and the lower of the two sets your maximum:
- LTC (Loan to Cost): the loan as a percentage of total project cost (land, build, professional fees and contingency). Typical maximum is around 70-75% of cost.
- LTGDV (Loan to Gross Development Value): the loan as a percentage of the completed scheme's market value. Typical maximum is around 60-65% of GDV.
These two constraints often pull in different directions, and working out which one actually caps your loan is the single most useful thing to understand before you apply. The full explanation, with a worked example, is in LTC vs LTV vs GDV vs LTGDV, and GDV itself is defined in the GDV glossary entry.
Experienced developers with a strong track record can sometimes stretch higher leverage through a senior plus mezzanine structure, or reach up to 100% of construction costs where the land is already owned outright and provides the deposit. First-time developers should expect the opposite: lower leverage and more scrutiny, which is covered in Development Finance for First-Time Developers.
Typical Rates, Terms and Fees
Treat these as indicative ranges; your actual terms depend on the scheme, your experience and the exit:
- Interest rate: commonly around 0.75% to 1.1% per month, charged only on drawn funds, not the full facility.
- Term: usually 12 to 24 months, matched to a realistic build and sales programme.
- Arrangement fee: typically 1.5% to 2.5% of the facility.
- Monitoring (QS) fee: covering the surveyor's ongoing inspections through the build.
- Legal, valuation and appraisal costs: yours and the lender's.
- Exit fee: charged by some lenders, often 1% to 2%.
Interest is normally rolled up rather than paid monthly, so nothing leaves your cash flow during the build; the accrued interest is repaid on exit. For the full fee stack, what drives pricing up or down, and a worked all-in cost example, see Development Finance Rates & Fees.
What Lenders Check on a Ground-Up Scheme
Because they are underwriting an unbuilt project, ground-up lenders look hard at whether it can actually be delivered and repaid:
- Planning permission. Full detailed planning, ideally with pre-commencement conditions discharged. Outline consent alone usually is not enough to draw construction funds.
- The build cost and programme. A realistic, itemised cost plan and timeline, with a contingency (often around 5-10%) built in. Optimistic costings are the fastest route to a problem mid-build.
- The contractor and contract. Who is building it, their track record, and the form of building contract (a JCT or design-and-build contract is reassuring). A credible professional team carries real weight.
- Your experience. A relevant development track record improves leverage and pricing. Without one, lenders look for an experienced main contractor, a monitoring surveyor and lower gearing to compensate.
- A credible exit. How the loan gets repaid: sale of the completed units, or refinance onto investment mortgages or development exit finance once the scheme is built.
- The GDV valuation. A supportable end value backed by comparables. An inflated GDV with no evidence caps the loan or sinks the application.
Worked Example
Consider a developer building a small residential scheme on a site they are buying:
- Land cost: £300,000
- Build cost: £600,000
- Professional fees and contingency: £100,000
- Total project cost: £1,000,000
- Projected GDV (completed value): £1,500,000
Applying the two ratios:
- 75% LTC = £750,000 maximum
- 65% LTGDV = £975,000 maximum
- Maximum loan = £750,000 (LTC is the binding constraint here)
The developer contributes the remaining £250,000, largely as the land equity. The lender releases the land tranche at completion of the purchase, then funds the build in stages against surveyor certificates. Interest rolls up on the drawn balance and is repaid, along with the loan, when the finished units sell or are refinanced.
(Figures are illustrative. Your actual terms depend on the lender, the scheme and your experience.)
Frequently Asked Questions
What is the difference between ground-up development finance and bridging?
A bridging loan releases the full amount upfront and suits purchases, chain breaks or light works. Ground-up development finance funds a full new build and is drawn in stages as the construction is certified, so you only pay interest on the money you have actually used. Ground-up schemes also involve ongoing monitoring that a bridge does not.
Can I get ground-up development finance for my first project?
Yes, though on tighter terms. First-time developers can access development finance by compensating for the lack of a track record with an experienced main contractor, a monitoring surveyor, a strong professional team and lower leverage. See Development Finance for First-Time Developers for what lenders require.
Do I need planning permission before I apply?
For construction funds to be released you generally need full detailed planning, ideally with the pre-commencement conditions discharged. You can begin conversations and arrange the land purchase earlier, but lenders will not fund the build itself against outline consent alone.
How much deposit do I need for a ground-up scheme?
Because loans are capped at around 70-75% of cost, plan to contribute roughly 25-30% of total project cost, which is often provided by the equity in land you already own. Higher leverage is possible for experienced developers through senior plus mezzanine structures.
How do I repay a ground-up development loan?
Through your exit: selling the completed units, refinancing them onto buy-to-let or commercial mortgages if you are holding them, or moving onto development exit finance to buy more time to sell once the scheme is built. Lenders want to see a credible exit before they commit.
Arranging Ground-Up Development Finance
Ground-up schemes are where lender choice, structure and timing make the biggest difference to your margin. Appetite varies widely: some lenders love new-build residential, others avoid it; some stretch leverage for the right team, others will not. Getting the LTC and LTGDV split right, and going to a lender who genuinely understands your scheme type, is what a specialist broker adds.
Get in touch with your scheme details (site, planning status, build cost, GDV and your exit plan) and we will give you an honest view of fundability, likely terms and which lenders to approach. For the wider picture, see the Development Finance Hub.