Securing development finance can often be a bit of an emotional rollercoaster, especially when navigating the complexities of property development finance for larger residential or commercial schemes. The initial phase can feel great – you’ve pitched the scheme, the lender is comfortable with the numbers, the Heads of Terms are signed, and everyone is feeling optimistic. By the time month three comes around, developers often find themselves deep in the weeds of due diligence, valuations, and legals. At that point, the initial momentum and optimism has faded, and the transaction transitions from a relationship-driven handshake into a forensic audit of your project. This is exactly where the majority of development finance deals fall apart. What actually kills a deal at the 90-day mark usually comes down to the details. We have highlighted why this milestone is a major timestamp and the main deal-killers we see repeatedly.
The valuation doesn’t support the leverage
A major factor that can make or break a deal is the valuation report. If the valuation comes in below expectations, the knock-on effect is immediate – the Gross Development Value (GDV) is marked down, Loan-to-Value (LTV) increases and thus the lender either reduces the loan amount or asks for more equity from the borrower. Even if the valuation only slightly differs from expectations, the impact is felt throughout the capital stack, especially where fees, interest and contingency were already tight. The key driver is that lenders will lend against their valuer’s view, not the borrower’s.
The Surveyor’s Reports
The reports conducted by the Quantity Surveyor (QS) / Project Monitoring Surveyor (PMS) provide the lender with a reality check on costs, programme, and deliverability. If build costs are understated, contingency is thin, or key items have been missed, the lender will update the budget and reduce the facility accordingly. An extended programme or higher cost plan can also increase interest and fees, which further erodes headroom. What was a slightly optimistic cost plan in week one often ends up being the reason a deal falls through in month three.
The contractor
Execution risk is a key lender underwriting focus area, and the main contractor of a development is usually the biggest driver of that risk. If the financials of the contractor are weak, the contract isn’t signed, or the scope of their role is unclear, the lender’s confidence in the scheme will drop. Even if the site is strong, but delivery plan of the project is fragile and risky, securing credit approval will be unlikely.
Planning risk
It is typically assumed that if you have planning approval then there is no planning risk, however planning is viewed through a more pragmatic lens from the lender’s perspective. Their primary concern is whether the consent is truly implementable and how swiftly pre-commencement conditions can be discharged. If discharge is uncertain, many lenders re-evaluate the developer’s proposed timeline and cash flow forecasts given there could be delays in conditions such as ecology, highways, drainage, and contamination. Furthermore, lenders want comfort that the developer will satisfy the necessary financial obligations in the planning process such as Section 106 (S106) and Community Infrastructure Levy (CIL) costs. The key point is that if the planning structures are vague from the outset, this usually causes friction in month three.
Title and legal due diligence surprises
When a deal enters the legal phase and solicitors begin reviewing the security, issues often surface that were not visible during the early phases. Restrictive covenants, rights of way, access problems, easements, utility constraints, ransom strips, or Rights of Light exposure can all become serious obstacles. Even where indemnity insurance is possible, lenders may still reduce leverage or require amendments to the terms before drawdown.
Developer equity
During the initial engagement between the developer and lender, sponsor equity is typically assumed, however when it must be evidenced properly in month three, deals often fall apart. If equity is conditional on another sale, an investor still in diligence, or liquidity that can’t be proven, lenders get nervous quickly. Timing is also an important factor. If the lender needs more day-one cash because the valuation or MS report shifted figures, the developer must be able to inject the shortfall swiftly. When the equity story weakens, the deal usually doesn’t “pause” but can often unravel quickly.
The Solution
The best way to avoid issues in month three isn’t to “push harder” in month three. It’s to make the deal easy to approve before the third-party reports and legal questions begin. This means testing valuation support early (with achieved comparables and a credible sales narrative), building a robust cost plan with realistic contingency and programme assumptions, and doing some legal due diligence on the title to avoid late-stage surprises. Additionally, it is important to ensure planning is deliverable with a clear discharge path for conditions, a firm handle on S106 and CIL, and a strong contractor strategy/team.
Working with an experienced development finance broker can also help developers identify potential risks early, structure deals more effectively, and improve lender confidence before formal due diligence begins.
How Silver Oak Capital Helps
At Silver Oak Capital, our job isn’t to simply secure terms. It’s to help clients build a fundable file early so that when valuation, QS/PMS, planning scrutiny, and legal diligence arrive, the deal doesn’t wobble.
