The Development Finance Completion Process: From Offer to Drawdown

The development finance completion process begins when the lender issues a formal facility offer, also known as a term sheet or heads of terms, and ends when the first drawdown of funds is made. In our experience arranging development finance across the UK, this process typically takes four to eight weeks for straightforward transactions and eight to twelve weeks for more complex deals. Understanding each step of the process, and preparing for it in advance, can significantly reduce the time to first drawdown and get your project started sooner.

The completion process involves multiple parties working in parallel: the borrower's solicitor, the lender's solicitor, the valuer, the monitoring surveyor, and potentially other professionals such as party wall surveyors, environmental consultants, and building control officers. Each party has specific tasks to complete and information to provide, and the overall timeline is determined by the slowest element. A delay in obtaining a valuation, for instance, can hold up the entire process even if all other elements are ready.

We have arranged hundreds of development finance facilities and have refined a process for managing completions efficiently. The key insight is that many of the completion requirements can be anticipated and prepared in advance of the facility offer. By the time the lender issues its offer, the developer should already have a solicitor instructed, a valuation booked or completed, searches ordered, party wall notices served, and a comprehensive legal pack assembled. This parallel processing approach is the single most effective way to accelerate the completion timeline.

The facility offer sets out the principal terms of the loan including the facility amount, interest rate, arrangement fee, loan term, drawdown schedule, financial covenants, and conditions precedent. The developer should review the offer carefully, comparing it to the terms discussed during the application process and identifying any points that differ from expectations. Points that are commonly negotiated at this stage include the longstop date, the minimum drawdown amount, the interest rate margin, the arrangement fee, and the scope of personal guarantees.

Once the offer is accepted, the developer instructs their solicitor to act on the transaction. Simultaneously, the lender instructs its own solicitor. The two solicitors will communicate directly throughout the completion process, and the speed of their interaction is a major determinant of the overall timeline. We always recommend that developers instruct a solicitor who has specific experience in development finance transactions, as this ensures efficient communication with the lender's solicitor and avoids delays caused by unfamiliarity with standard development finance documentation.

The lender also instructs a valuer to prepare a Red Book valuation of the development site and the proposed completed development. The valuation covers the current market value of the site, the estimated gross development value of the completed scheme, the estimated build cost, and the residual site value. For a typical residential development, the valuation fee ranges from £3,000 to £8,000 depending on the size and complexity of the scheme. The lender may also instruct a monitoring surveyor at this stage, who will prepare an initial report on the build cost budget, the construction programme, and the proposed drawdown schedule. Monitoring surveyor instruction fees typically range from £1,500 to £3,000 for the initial report, with subsequent inspection fees of £500 to £1,500 per visit.

The facility agreement will contain a list of conditions precedent, or CPs, that must be satisfied before the lender will make the first drawdown. These CPs represent the lender's checklist of requirements that ensure the security is in place, the legal documentation is correct, and the project is ready to proceed. Typical CPs for a development finance facility include satisfactory title investigation and clear title to the development site, satisfactory valuation and monitoring surveyor reports, evidence that all planning permissions are in place with pre-commencement conditions discharged, executed building contract with the approved contractor, evidence of all required insurances including contractor's all risks, public liability, and employer's liability, payment of the arrangement fee, evidence that the borrower's equity contribution has been invested or is available, executed facility agreement, debenture, and personal guarantees, and company searches and know-your-customer verification.

The CPs that most frequently cause delays are planning condition discharges, which can take eight to twelve weeks if not started early; the building contract, which may require amendments to satisfy the lender's solicitor; insurance, where obtaining the correct policies with the required endorsements can take two to four weeks; and the borrower's equity contribution, which must be evidenced in the SPV's bank account or paid into the solicitor's client account before completion.

We always provide developers with a checklist of anticipated CPs at the application stage, before the facility offer is issued, so that they can begin assembling the required documentation in advance. A developer who has their building contract signed, insurance in place, planning conditions discharged, and equity available can move through the CP process in two to three weeks. A developer who has not prepared for any of these requirements may need six to eight weeks or more. The difference in interest cost on a £2,000,000 facility at 8% per annum between a three-week and an eight-week completion process is approximately £13,000, a real financial cost of poor preparation.

Legal completion is the point at which the facility agreement and all security documents are signed, the lender's charge is registered at the Land Registry, and the first drawdown funds are released to the borrower's solicitor. The process follows a carefully choreographed sequence that the solicitors on both sides manage collaboratively.

In the days leading up to completion, the lender's solicitor confirms that all CPs have been satisfied and prepares a certificate of title, which is a formal confirmation to the lender that the title to the development site is good and marketable, that the lender's charge will be a valid first legal charge, and that there are no material issues arising from the due diligence process. The borrower's solicitor ensures that all documents requiring the borrower's signature are executed, that the equity funds are in place, and that any existing charges on the title can be discharged simultaneously with completion.

On the day of completion, the sequence typically proceeds as follows: the borrower's solicitor confirms that all documents have been signed and equity funds are in place; the lender's solicitor confirms that all CPs are satisfied and instructs the lender to release the funds; the lender transfers the drawdown amount to the lender's solicitor's client account; the lender's solicitor transfers the funds to the borrower's solicitor's client account; the borrower's solicitor uses the funds to complete the site purchase if applicable, discharge any existing charges, and transfer the net proceeds to the borrower's bank account. The lender's solicitor then submits the application to register the lender's charge at the Land Registry within the priority period of the official search.

The first drawdown of a development finance facility typically covers the land purchase price, or a refinance of the existing land value if the developer already owns the site, plus the arrangement fee if it is being added to the loan rather than paid from the developer's own funds. The first drawdown does not usually include any construction costs, as these are released in subsequent drawdowns as the build progresses.

Subsequent drawdowns follow the process set out in the facility agreement. The developer submits a drawdown request to the lender, specifying the amount requested and the works that have been completed since the last drawdown. The lender instructs the monitoring surveyor to inspect the site and verify that the claimed works have been completed to the required standard and that costs are in line with the approved budget. The monitoring surveyor prepares a report recommending the drawdown amount, which may be the full amount requested, a reduced amount if works are behind schedule or quality issues are identified, or a nil recommendation if there are significant concerns.

The typical time from drawdown request to receipt of funds is five to fifteen working days, depending on the lender's internal processes and the monitoring surveyor's availability. Some lenders offer faster turnaround for experienced borrowers with established track records. Understanding this timeline is essential for cash flow planning, as the developer must fund contractor payments from working capital during the period between drawdown requests. We always advise developers to maintain a working capital buffer of at least one month's contractor costs to bridge the gap between drawdowns. For a scheme with monthly contractor costs of £75,000, this means keeping £75,000 available outside the development finance facility. Submit your deal and we will structure the drawdown programme to align with your build programme and cash flow requirements.

The most common cause of completion delays is the failure to discharge pre-commencement planning conditions. We cannot emphasise this enough: begin the condition discharge process as soon as planning permission is granted, regardless of when you intend to apply for finance. A developer who receives planning permission in January and applies for finance in April should have most conditions discharged by the time the lender's solicitor begins due diligence, rather than starting the discharge process in May when the lender is ready to complete.

The second most common delay is the building contract. Lenders' solicitors frequently raise queries about building contracts, particularly bespoke contracts or contracts that have been significantly amended from the standard JCT form. Using a standard JCT contract with minimal amendments reduces the scope for queries and speeds up the review process. If amendments are necessary, discuss them with your solicitor and your broker before the facility offer is issued, so that the lender's solicitor can be briefed on the amendments in advance.

Insurance is another common bottleneck. The lender will require specific insurance policies with specific endorsements, including contractor's all risks insurance, public liability insurance, employer's liability insurance, and professional indemnity insurance for the design team. Obtaining these policies, particularly with the lender noted as an interested party, can take two to four weeks. Instruct your insurance broker at the same time as you instruct your solicitor, and provide them with the lender's insurance requirements as soon as they are available. By anticipating and addressing these common delays, a well-prepared developer can achieve a completion timeline of four to six weeks from facility offer to first drawdown, compared to eight to twelve weeks for a developer who has not prepared.