The Ultimate Guide to Development Loans for Small-Scale Property Developers in the UK
Are you planning to build between 1 and 10 residential units in the UK? If you’re new to property development or scaling up from buy-to-let investing, securing the right funding is critical.
Small-scale developers often struggle to find clear, reliable advice on development finance options. Traditional lenders tend to overlook projects under 10 units, and many first-time developers don’t know where to begin.
At Sunrise Commercial Finance, we specialise in helping small developers and first-time investors secure development loans, bridging loans, and mezzanine finance tailored to their needs. This guide explains your loan options, what lenders are looking for, and how to get funding approved — even if this is your first project.
Why Small Developers Need Specialist Property Finance
If you’re planning to build new houses, convert a property into flats, or refurbish a building to sell or let, you won’t be able to use standard buy-to-let mortgages. Instead, you’ll need short-term development finance designed specifically for property developers.
This type of finance can cover:
- The purchase of land or property
- Build or refurbishment costs
- Architect, planning, and legal fees
- VAT bridging in some cases
- Interest rolled up or deferred until the end of the loan
Development finance is structured around the project’s timeline and value, not personal income or credit scores.
1. Development Finance (Senior Debt)
This is the most common form of finance for ground-up developments or major refurbishments.
Key features:
- Loans of up to 65–75% of GDV (Gross Development Value)
- Typically 80–90% of total build costs
- Loan terms of 6 to 24 months
- Rolled-up interest (no monthly payments)
- Flexible drawdowns in line with build stages
- Rates from 11% to 18% per annum
Some lenders will consider first-time developers if they are supported by an experienced team, such as a main contractor, project manager, and quantity surveyor.
2. Bridging Loans for Light or Medium Refurbishments
If you’re purchasing an existing property and upgrading it (without structural changes), a bridging loan is a flexible short-term option.
Key features:
- Up to 75% of the purchase price
- Up to 100% of refurbishment costs (subject to experience)
- Loan terms from 6 to 18 months
- Interest rates from 0.9% to 1.5% per month
- Exit via sale or refinance
This option is ideal for flips, conversions under permitted development rights, or preparing a property for a buy-to-let mortgage.
3. Stretched Senior or Hybrid Finance
These loan structures are designed for developers with limited cash available but strong deals. They provide higher leverage than traditional development finance.
Key features:
- Up to 85–90% of total costs
- Slightly higher interest rates than senior debt
- Works well for experienced builders or joint ventures
- Reduces the need for large upfront equity contributions
Hybrid finance gives developers the flexibility to preserve working capital for multiple projects or unexpected build issues.
4. 100% Funded Joint Venture Development Finance
If you’ve secured a profitable site but lack the capital to fund the deal, a joint venture development loan could provide the full funding required.
Key features:
- 100% funding of land acquisition and build costs
- No cash required from the developer
- Profit share structure (often 50/50 after costs)
- The lender may provide contractors and monitor build progress
- Suitable for developers with site opportunities and a track record in property
This is an excellent option if you have experience in property or project management and are sourcing undervalued or off-market deals. However in the current market the options are limited.
What Lenders Look for in Small-Scale Development Projects
Even for small-scale developers, lenders still carry out thorough due diligence. To secure finance, you’ll need:
- A viable project with planning permission or permitted development rights
- Clear and accurate costings
- A reliable build schedule and contractor
- A realistic GDV (supported by comparable evidence)
- A defined exit strategy (sale or refinance)
- Basic developer CV or team credentials
At Sunrise Commercial Finance, we help package and present your project to ensure it meets lender criteria and stands out from the competition.
Common Mistakes Small Developers Make (and How to Avoid Them)
New developers often make simple but costly mistakes when it comes to funding:
- Underestimating total build and finance costs
- Overvaluing the end GDV
- Choosing unqualified or unreliable builders
- Not preparing for build delays or planning changes
- Rushing into direct lender applications without a broker
We work with you from day one to avoid these pitfalls. Our clients benefit from strategic advice, lender relationships, and tailored finance structures that reduce risk and maximise profit.
Why Choose Sunrise Commercial Finance?
As a specialist broker with access to over 100 UK development lenders, we’re perfectly positioned to help small-scale and first-time developers succeed.
We provide:
- Access to market-leading development and bridging finance products
- Fast and flexible terms based on your specific project
- Clear guidance on what lenders need — and how to get approved
- Ongoing support from land acquisition to final sale or refinance
- Transparent advice, competitive fees, and fast decisions
Whether you’re building 2 houses, converting a pub into flats, or developing a multi-unit site, we’ll find the right funding solution — fast.
Get Started with a Free Consultation
If you’re serious about funding your next development, we’re ready to help.
Contact us today for a free consultation, and let us structure the right loan for your project.
For more information contact us for a fees free chat.
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📞 Call us at 07939 091418
📧 Email: john@sunrisecommercial.co.uk
🌐 Visit: https://www.sunrisecommercial.co.uk/
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