What is Construction Finance?

Construction finance — also known as property development finance — is specialist lending used to fund construction or major renovation projects in the UK. Unlike standard mortgages or business loans, funds are released in stages as construction progresses, matching each drawdown to the build schedule. It is available for residential development, commercial construction, conversion projects and major refurbishments. Seven Hills Capital Group works with specialist development lenders to match your project profile to the right lender and terms.

The lender assesses the project — site value, build costs, gross development value (GDV) on completion

A facility is agreed — typically 60–70% of the total project cost

An initial drawdown covers the land or site acquisition cost

Further tranches are released as construction milestones are reached and independently verified

On completion, the development finance is repaid through a sale or refinanced onto a long-term mortgage

Pros

• Funds released in stages — matching finance drawdowns directly to build costs
• Enables larger development projects than could be funded from own resources alone
• Available for a wide range of project types, sizes and developer experience levels
• Experienced developers can access high loan-to-cost ratios from specialist lenders

Things To Consider

• Complex to arrange — detailed project appraisal and independent monitoring required
• Independent monitoring surveyor costs add to the overall project finance cost
• Development finance carries a higher cost than long-term lending due to the construction risk premium
• Lenders require a credible and realistic exit strategy — sale or refinance on completion

How Seven Hills Capital Group Could Help Your Business

Every business situation is different. The illustrative examples on our case studies page are based on common scenarios we see from UK business owners and landlords - showing how the right finance product, found through a whole-of-market broker, can make a real difference.

What percentage of my project costs will a lender fund?

Property development lenders typically fund 60–75% of total project costs including land and build. Some specialist development finance lenders will go to 80–85% for experienced developers with strong track records. The balance must be funded from your own equity contribution.

How is construction finance different from a bridge loan?

A bridging loan provides a single lump sum for a short-term purpose. Construction finance releases funds in tranches as the build progresses, matching drawdowns to actual verified expenditure. For significant construction or development projects, development finance is more appropriate and more cost-effective.

What is gross development value (GDV)?

GDV is the estimated market value of your completed development. Lenders use GDV to assess the viability and security of the project — a typical development loan will not exceed 65–70% of projected GDV. Seven Hills Capital Group will help you present your GDV appraisal in the strongest possible way.

Do I need planning permission before applying for construction finance?

In most cases, yes. Development lenders want to see planning permission in place before committing to construction finance. Some lenders will consider pre-planning situations at lower LTVs for experienced developers — Seven Hills Capital Group will identify which lenders are open to this for your project.

How long does construction finance take to arrange?

Development finance requires detailed project appraisal, site inspection and legal work — typically 4–8 weeks from application to first drawdown. Seven Hills Capital Group will manage the arrangement process and work to your construction programme timeline.