Broker Fees in Development Finance: What's Fair and What's Excessive

A development finance broker acts as the intermediary between you and the lender, sourcing the most appropriate facility for your project from across the market. Unlike a standard mortgage broker who selects from a panel of mainstream lenders, a development finance broker works with a diverse range of specialist providers including banks, challenger banks, bridging lenders, private credit funds, and family offices. The value a good broker provides is access to products and pricing that you cannot obtain by approaching lenders directly, combined with expertise in structuring deals to maximise the terms available.

In practical terms, the broker's work includes: preparing a comprehensive funding application that presents your project in the best possible light, distributing it to appropriate lenders, negotiating terms on your behalf, managing the due diligence process, coordinating with solicitors and valuers, and troubleshooting issues that arise between application and drawdown. A typical development finance transaction involves 40 to 80 hours of broker time from initial enquiry to completion, depending on complexity.

The broker's role becomes particularly valuable on complex transactions where structuring makes a material difference to the outcome. For example, a scheme that requires mezzanine finance layered on top of senior debt needs a broker who understands how to present the project to both lenders simultaneously, ensure the intercreditor arrangements work, and negotiate terms that are compatible across both facilities. Without this expertise, borrowers can end up with misaligned facilities that create practical problems during the build and at exit.

Development finance broker fees in the UK are typically structured as a percentage of the total facility arranged, ranging from 0.5% to 2% depending on the broker, the complexity of the deal, and the size of the facility. The most common fee is 1%, which is the standard rate charged by the majority of reputable brokers in the market. On a £2,000,000 facility, a 1% broker fee equates to £20,000.

Some brokers charge a tiered fee that reduces as the facility size increases. For example, 1.5% on the first £1,000,000 and 1% on amounts above that. On a £3,000,000 facility, this would equate to £35,000 (£15,000 plus £20,000). Other brokers charge a flat fee, particularly on smaller transactions where a percentage-based fee would not adequately compensate them for their time. A minimum fee of £5,000 to £7,500 is common among quality brokers.

The fee may be payable on commitment (when the facility agreement is signed), on first drawdown (when funds are first advanced), or on completion (when the final drawdown occurs). Completion-based fees align the broker's interests with yours because the broker only gets paid when you have successfully drawn the facility. We believe this is the fairest structure and it is how we operate. Brokers who demand full payment at commitment or, worse, at the term sheet stage should be approached with caution, because they have less incentive to support you through to completion.

For a 1% fee on a £2,000,000 facility, you are paying £20,000 for a professional service. That fee should deliver tangible value that exceeds what you could achieve by approaching lenders directly. At a minimum, your broker should provide: access to a wide panel of lenders (at least 30 to 50 active providers), a detailed analysis of the options available to your specific project, negotiated terms that are better than the lender's standard offering, and active management of the process from application to drawdown.

A good broker will also save you money elsewhere. By negotiating better interest rates, lower arrangement fees, or the removal of exit fees, a skilled broker can often save their entire fee in reduced finance costs. We track the savings we deliver for clients and, on average, the interest rate and fee savings we negotiate exceed the broker fee by a factor of 1.5 to 2 times. This means our clients effectively receive a net benefit from using a broker rather than a net cost.

Beyond the financial benefit, a broker provides risk management. They know which lenders are reliable, which ones are slow, and which ones have a history of changing terms at the last minute. This knowledge is particularly valuable in a market where some lenders operate with less transparency than others. A broker who has placed hundreds of deals knows the pitfalls and can steer you away from lenders who might cause problems. This advisory value is difficult to quantify but is often the most important service a broker provides.

While broker fees are a legitimate cost of development finance, some practitioners charge fees that are disproportionate to the service provided. Fees above 2% of the facility should be carefully scrutinised unless the deal is exceptionally complex or the facility size is very small. A broker charging 2.5% on a £3,000,000 facility is collecting £75,000, which is a substantial sum that significantly impacts your scheme economics.

Be wary of brokers who charge both a percentage fee and a fixed fee on top. For example, a 1% fee plus a £5,000 arrangement coordination fee is effectively charging more than 1% without being transparent about the total cost. Similarly, watch out for brokers who receive commission from the lender and still charge the borrower a full fee. While dual-fee arrangements are not inherently wrong, the broker should be transparent about the total compensation they receive from all parties. In our practice, if we receive a lender commission, we credit this against the client fee so there is no duplication.

The clearest warning sign is a broker who asks for fees upfront before they have secured a facility offer. Requesting a non-refundable engagement fee of £2,000 to £5,000 before any work is done is a practice that has no place in a properly functioning market. Reputable brokers work on a success basis, meaning they are only paid when they deliver a facility that the client draws. If a broker asks for upfront fees, consider whether they are confident in their ability to deliver the outcome you need, or whether they are simply collecting fees regardless of the result.

Technically, no. You can approach development finance lenders directly, and some developers, particularly experienced operators with established lender relationships, choose to do so. However, for the majority of developers, particularly those undertaking fewer than five projects per year, a broker provides access to a wider market and better terms than can be obtained through direct approaches.

The development finance market is fragmented, with over 100 active lenders offering different products, criteria, and pricing. Without a broker, you would need to approach each lender individually, provide documentation to each, and compare offers without the benefit of knowing each lender's typical flexibility on terms. An experienced broker can shortlist the three to five most appropriate lenders within hours of reviewing your project, saving weeks of research and multiple application processes.

There is also a practical consideration: many development finance lenders prefer to work through brokers because the broker pre-qualifies the deal and presents it in a format the lender is accustomed to receiving. Some lenders on our panel offer better terms through broker channels than they do for direct applications, because the broker relationship reduces their origination costs. This means that going direct does not always result in a saving, and in some cases you will actually pay more. Speak to us through our deal room and we will provide an honest assessment of whether a broker is right for your specific project.

We believe in complete transparency. Our standard broker fee is 1% of the facility arranged, with a minimum fee of £5,000 for smaller transactions. This fee is payable on successful drawdown of the facility, meaning you pay nothing unless we deliver a result. There are no upfront engagement fees, no hidden administration charges, and no supplementary costs. The 1% is the total broker fee, and it is clearly stated in our engagement letter before we begin work.

For larger facilities above £5,000,000, we offer discounted rates starting from 0.75% to reflect the lower marginal cost of arranging higher-value transactions. For clients with a pipeline of multiple projects, we offer portfolio pricing that reduces the per-deal fee in exchange for a commitment to bring multiple schemes through our deal room. These arrangements are individually negotiated and can deliver meaningful savings over a programme of development activity.

In return for our fee, you receive full access to our panel of over 60 specialist lenders, a dedicated relationship manager who handles your transaction from enquiry to drawdown, negotiated terms that reflect our market knowledge and lender relationships, and ongoing support throughout the facility term. If issues arise during the build, whether with drawdowns, monitoring surveyors, or lender requirements, we remain engaged and act as your advocate. Our goal is to build long-term relationships with developers who come back to us for every deal, and that only happens if we consistently deliver value that exceeds our fee. If you are currently working with another broker or approaching lenders directly, we welcome the opportunity to provide a comparison. Submit your details through our deal room for a no-obligation funding assessment.