For any significant construction project, whether it’s a single bespoke build or a multi-unit housing scheme, senior development finance is the primary engine of funding. It is the first charge loan that covers a strong portion of the land purchase and the majority of construction costs.
At Silver Oak Capital, we understand that senior development finance is not just about the interest rate – it is about leverage, cash flow, and control. We structure facilities that provide the financial headroom you need to navigate the inevitable challenges of property developments.
Senior Development Finance is a first charge loan facility secured against a development site to fund it’s construction and land purchase (if required).
The Structure: The loan is split into two parts.
Small to medium-sized developers are the backbone of the UK housing market. High-street banks have retreated from this sector, leaving a gap that specialist lenders have filled. We connect you with these lenders who assess projects based on viability, not just the size of your balance sheet.
LTGDV is the percentage of the estimated value of the development once completed than the lender will advance. Lender’s usually cap out at 65% – 70% of GDV for development loans.
The percentage of the total project costs (land + build + professional fees) the lender will cover. Typically up to 85% – 90%.
For developments that have secured planning approval, but the land still needs to be acquired/purchased, most senior lenders will cap the portion of the facility supporting the land acquisition at roughly 50-60% of the land’s market value. This is because lenders want to see buy-in or “skin in the game” from the developer by putting their own equity into the project and the scheme’s risk.
The lender will appoint an Independent Monitoring Surveyor (IMS) for the scheme who visits the site monthly to check progress. The lender will not provide the next drawdown of funds until the IMS signs off ensuring the project is on schedule.
The biggest hurdle for developers is often the deposit/equity contribution. We have the market coverage to ensure you secure the highest possible LTC (up to 90% with certain lenders), minimising the amount of personal cash you need to tie up in the deal.
Lenders often require warranties (Collateral Warranties) from your architect, structural engineer, and main contractor. This paperwork can delay the loan by months. We manage this process proactively, liaising with your professionals to ensure the legal pack is ready for completion.
In a market of rising material costs, we source lenders who offer a contingency facility within the loan. If prices rise, you have a pre-agreed buffer to draw from, preventing the project from stalling due to lack of funds.
Yes, usually. Senior lenders are risk-averse. They want to see that you (or your main contractor) have successfully completed a similar scheme before. If this is your first project, Silver Oak Capital can match you with a lender who specialises in “First Time Developer” products, provided you have a strong team around you.
You do not pay monthly. Development finance interest is “rolled up” (added to the loan balance) throughout the build. You pay the total capital plus the accumulated interest in one lump sum when you sell or refinance the units at the end.
Development loans usually have a term of 18-24 months. If the market is slow and you haven’t sold the units by the end of the term, we can arrange a Development Exit Bridge. This pays off the development loan, giving you a further 12 months at a lower interest rate to sell the units calmly without pressure.