Development Finance for First-Time Developers: What You Need to Know

Yes — but not all lenders will consider you, and those that do will apply different criteria. The development finance market includes over 100 active lenders in the UK, and approximately 30-40 of these will consider first-time developers. The key difference is that you will typically receive lower leverage (50-60% LTGDV vs 65-70% for experienced developers) and pay higher interest rates.

The reason is straightforward: development is inherently risky, and experience reduces that risk. A developer who has successfully completed three similar schemes presents less risk to a lender than someone who has never managed a build programme, dealt with contractors, or navigated building regulations.

However, lenders recognise that every experienced developer was once a first-time developer. What they're looking for is evidence that you've mitigated the risks associated with inexperience.

The single most impactful thing you can do as a first-time developer is appoint an experienced project manager or use a design-and-build contractor with a proven track record. This shifts the construction risk from you to a professional who has delivered similar projects. Many lenders will treat a first-time developer with an experienced contractor more favourably than one planning to self-manage the build.

Start with a straightforward scheme. A 2-4 unit residential development with full planning permission is the ideal first project. Avoid complex schemes (basement excavations, listed buildings, commercial conversions) until you have a track record. Lenders want to see that your first project is deliverable.

Have more equity than the minimum. If the lender asks for 40% equity, try to bring 45-50%. The extra equity provides a buffer that makes lenders more comfortable, and it demonstrates that you have meaningful financial commitment to the project's success.

Prepare a comprehensive development appraisal using industry-standard software (Argus Developer or similar). Include realistic build costs supported by at least two contractor quotes, a detailed programme, and conservative sales assumptions. First-time developers who present institutional-quality appraisals stand out.

Interest rates for first-time developers typically range from 8-12% per annum, compared to 6.5-9% for experienced developers. Arrangement fees are usually at the higher end of the range (1.5-2%). Some lenders will also require a personal guarantee, which is common for first-time developers.

The monitoring surveyor will likely visit more frequently — monthly rather than at milestone stages. This isn't a sign of distrust; it's the lender being appropriately careful with a borrower who hasn't managed a build before.

Expect the process to take longer. A first-time developer application typically takes 4-8 weeks from submission to drawdown, compared to 2-4 weeks for an experienced developer with an existing lender relationship. Use this time productively by finalising contractor appointments and preparing for site mobilisation.

Underestimating build costs is the most common error. Professional developers build in 5-10% contingency because unexpected costs always arise — ground conditions, material price increases, programme delays. First-time developers often present the most optimistic cost projection, which makes lenders nervous.

Ignoring planning conditions. Full planning permission doesn't mean unconditional. Pre-commencement conditions (archaeological surveys, drainage strategies, construction management plans) must be discharged before you can start on site. Failing to factor in the time and cost of discharging conditions can delay your project.

Choosing the cheapest contractor. The lowest quote is not always the best value. An experienced contractor who costs 10% more but delivers on time and to specification is worth more than a cheap contractor who causes delays and quality issues that affect your sales values.