A–C
Arrangement fee — A fee charged by the lender for setting up the development finance facility. Typically 1–2% of the total loan amount, payable on completion of the loan.
BCIS — Building Cost Information Service. A subsidiary of RICS that publishes benchmark construction cost data used by lenders, valuers, and quantity surveyors to validate build budgets.
Bridging finance — Short-term secured lending used for property acquisition, chain-breaking, or light refurbishment. Unlike development finance, bridging loans are not structured around a build programme with staged drawdowns.
Build cost — The total cost of physical construction, typically expressed as £ per square foot. Includes substructure, superstructure, finishes, M&E, and external works. Excludes land, professional fees, and finance costs.
CIL (Community Infrastructure Levy) — A fixed charge per square metre of new development, set by the local planning authority. Must be paid before construction begins on most new-build schemes.
Contingency — An allowance within the development budget for unexpected costs. Typically 5–10% of build cost. Lenders expect to see contingency in every appraisal.
Credit paper — The structured document presenting a development finance deal to a lender's credit committee. Contains executive summary, borrower overview, scheme description, financial appraisal, risk analysis, and proposed debt structure.
Credit committee — The decision-making body within a lending institution that approves or declines development finance applications. Meets on a regular schedule (weekly, fortnightly, or monthly depending on the lender).
D–F
Day-one advance — The initial drawdown from a development finance facility, typically used to fund the site acquisition. Distinguished from subsequent build drawdowns.
Day-one LTV — The day-one advance expressed as a percentage of the current market value of the site (before development). Typically capped at 65–70%.
Development appraisal — A financial model calculating the viability of a development project: GDV minus total costs equals developer profit. Also called a residual appraisal.
Drawdown — The release of funds from the development finance facility. Development loans are drawn in stages (tranches) as construction progresses, subject to monitoring surveyor sign-off.
Exit fee — A fee charged by the lender when the loan is repaid. Typically 0–1.5% of the total facility. Some lenders charge no exit fee.
Exit strategy — The plan for repaying the development finance loan. Common exits include unit sales, refinance to term debt, or bulk sale to an investor.
G–L
GDV (Gross Development Value) — The total market value of the completed development — the sum of all individual unit values when built and ready for sale.
Intercreditor agreement — A legal agreement between a senior lender and a mezzanine lender setting out priority of repayments and enforcement rights. Required whenever mezzanine sits behind senior debt.
JCT contract — A standard form building contract published by the Joint Contracts Tribunal. JCT Design & Build is the most common form used in development finance.
LTC (Loan-to-Cost) — The total facility as a percentage of total project costs (land + build + fees + finance + contingency). Typically 75–90% in UK development finance.
LTGDV (Loan-to-Gross Development Value) — The total facility as a percentage of the GDV. The primary ratio lenders use. Most cap at 60–70%.
LTV (Loan-to-Value) — In development finance, usually refers to the day-one advance as a percentage of current site value.
M–P
Mandate — A lender's lending criteria: the types of deals they will consider, defined by geography, asset class, loan size, leverage, and borrower experience requirements.
Mezzanine finance — A layer of debt subordinated to the senior loan, filling the gap between senior lending and developer equity. Higher cost (15–25% pa) reflecting higher risk.
Monitoring surveyor — An independent surveyor appointed by the lender to verify construction progress and authorise drawdowns. Visits the site at each build stage.
NEC contract — New Engineering Contract. An alternative standard form building contract, common on larger or more complex projects.
NHBC — National House Building Council. The main warranty provider for new-build residential properties in the UK. Lenders require NHBC or equivalent registration.
Permitted development rights (PDR) — Rights allowing certain types of development without full planning permission, subject to prior approval. Class MA covers commercial-to-residential conversion.
Pre-commencement conditions — Planning conditions that must be discharged before construction work can begin.
Profit on cost — Developer profit expressed as a percentage of total project costs. Lenders typically require minimum 15–20%.
Profit on GDV — Developer profit expressed as a percentage of GDV. Typically 12–18%.
Q–S
QS (Quantity Surveyor) — A professional who prepares detailed construction cost estimates and cost plans. A QS report is one of the most important documents in a development finance application.
Rolled-up interest — Interest that is added to the loan balance rather than paid monthly. Standard in development finance — the full balance (principal + interest) is repaid on exit.
S106 (Section 106) — A legally binding agreement between developer and local planning authority requiring contributions such as affordable housing, education, or highways improvements.
Senior debt — The primary development finance loan, ranking first for repayment in any enforcement scenario. Distinguished from mezzanine (subordinated) debt.
Sensitivity analysis — Stress-testing a development appraisal by varying key assumptions (GDV, build cost, programme) to see how the deal performs under adverse conditions.
Stretched senior — A single facility providing higher leverage (65–75% LTGDV) than standard senior, combining what would otherwise be senior and mezzanine into one loan.
T–Z
Term sheet — A non-binding document from the lender setting out proposed loan terms (amount, rate, fees, conditions). The first formal indication of lending appetite after a credit paper is reviewed.
Title — The legal ownership of land, as recorded at the Land Registry. Title documents are reviewed by the lender's solicitor for defects, restrictions, and encumbrances.
Tranche — An individual drawdown within the overall facility. Development loans are divided into tranches corresponding to construction stages.
Valuation (Red Book) — A formal property valuation prepared in accordance with RICS standards (the "Red Book"). Development finance lenders commission independent valuations of both current site value and projected GDV.
Warranty — A structural warranty (typically 10 years) required by lenders on new-build properties. Provided by NHBC, Premier Guarantee, or other approved providers.