Development finance failures do not always happen at the planning stage. Sometimes everything is in place, the site is ready, the contractor is lined up, and then the funding falls apart. That was the situation our client found himself in when his lender withdrew their facility three weeks before the planned build start.
He had purchased a plot of land in Bury, Greater Manchester, obtained full planning permission for four semi-detached homes, and agreed terms with a local building contractor. His original lender had conducted a site visit and issued a formal offer. Then, without much explanation, they told him they were pulling back from residential development lending across their whole book.
He called us with about three weeks until the contractor was due to mobilise. Walking away was not really an option. He had already spent a significant amount on the plot, planning application, architect fees, structural engineer reports, and the pre-construction legal work. He needed a replacement lender quickly.
The project
The scheme consisted of four three-bedroom semi-detached houses on a cleared site in a residential area of Bury. Planning had been granted without any conditions that would slow down the start. The GDV (gross development value) was estimated at £1.28m based on comparable sales in the same postcode over the previous 12 months. Build costs were £480,000 according to the contractor's priced schedule.
The numbers worked. The challenge was time.
Project at a glance
| Location | Bury, Greater Manchester |
| Scheme | 4 x three-bedroom semi-detached houses (ground-up) |
| GDV | £1,280,000 |
| Build cost | £480,000 |
| Land value | £215,000 (owned by client) |
| Loan amount | £850,000 (covering build costs, fees and contingency) |
| LTGDV | 66.4% |
| Rate | 0.85% per month (rolled up) |
| Term | 18 months |
| Time from enquiry to first drawdown | 14 days |
| Exit | Sale of completed units |
How we approached it
The first thing we did was look at where the original lender had sat in the market and identify which other development lenders would look at the same type of scheme. Development finance is a specialist area and not every lender works the same way. Some lend on GDV, some on costs, some want experience from the developer, some are happy with first-time developers on smaller schemes.
Our client had one completed project behind him, a pair of new-build semis in Rochdale from four years prior, which gave him a track record. That mattered. Some lenders would have declined for lack of experience on a scheme of this size, but we were able to find a specialist who was comfortable with his background.
We submitted a full case pack on day two, including the planning documents, contractor's schedule of works, QS appraisal, and the client's track record summary. The lender came back with a credit-approved term sheet on day five.
The valuation was completed on day nine. The RICS valuer confirmed the GDV and was satisfied with the comparable evidence. Legal completion and first drawdown happened on day 14.
How development finance drawdowns work
Unlike a standard bridging loan where the full amount is drawn on day one, development finance is released in stages as the build progresses. Each drawdown is triggered by a monitoring surveyor inspecting the site and confirming that the work has been completed to the required standard.
In this case, drawdowns were structured around five key build milestones: foundations complete, wall plate level, roof on, first fix complete, and practical completion. The monitoring surveyor visited at each stage and released funds within a few days of inspection.
This staged structure is standard in the industry and protects the lender, but it also protects the developer. You do not draw interest on money you have not yet received.
The outcome
The build completed on time and within budget. All four homes sold off plan before construction finished, which was a much better outcome than our client had planned for. The development loan was repaid from the sales proceeds and the transaction closed cleanly within the 18-month term.
If your development finance has fallen through, or you are planning a new scheme and want to understand your options, we are happy to help at any stage of the process.
Planning a development in the North West? Let us help with the finance.
Development Finance Get in touch