Joint Borrower Development Finance: Partnerships and Multiple Directors

Property development is frequently a collaborative endeavour. Partners bring different strengths to a project: one may have capital, another may have development experience, a third may have found the site or secured the planning permission. Joint ventures, partnerships, and multi-director companies are the norm rather than the exception in the UK development market, and development finance lenders are fully accustomed to assessing applications from multiple borrowers. Understanding how joint borrower applications are assessed allows you to structure your partnership and application for maximum success.

In our experience, approximately 60-70% of development finance applications involve more than one individual, whether as co-directors of a special purpose vehicle, partners in a formal partnership, or individual co-borrowers on a personal basis. The most common structure is a limited company with two or more directors and shareholders who are also the personal guarantors of the facility. This structure provides the limited liability protection of a corporate entity while giving the lender the personal recourse that a development finance facility requires.

Joint borrower applications can be stronger than single borrower applications if the partnership is well-structured. Two experienced developers who each bring a track record of successful projects present a lower risk to the lender than either would individually, because the combined experience covers a wider range of scenarios and the partnership provides built-in project management resilience. Similarly, a partnership between an experienced developer and a well-capitalised investor can access higher leverage and better terms than either party would achieve alone, because the combination of experience and capital addresses both of the lender’s primary concerns.

When assessing a joint borrower application, lenders evaluate each individual separately before considering the application as a whole. For each person involved in the borrowing entity, whether as a director, shareholder, or guarantor, the lender will conduct a credit search, review personal financial information including assets and liabilities, and assess their experience in property development. The lender will also consider the relationship between the parties, the equity split, and the governance structure of the borrowing entity.

The credit profile of each individual matters, and the weakest link in the chain can affect the terms offered. If one director has an excellent credit history and substantial personal assets while another has historic adverse credit markers, the lender will typically base their risk assessment on the weaker profile. This does not necessarily mean the application will be declined, but the terms may reflect the additional risk. Some lenders require all guarantors to meet their credit criteria; others will consider the application if at least one guarantor meets the criteria and the overall application is strong. We match clients with the most appropriate lenders based on the collective profile of the borrowing group.

Experience is assessed across the group rather than requiring each individual to have a development track record. If one partner has completed ten developments while the other is new to the sector, the experienced partner’s track record counts for the application. The lender will want to understand the role each person plays: who is responsible for project management, who handles the financial oversight, and who makes key decisions. A clear division of responsibilities that leverages each person’s strengths is viewed positively. For guidance on applications where development experience is limited, see our guide for first-time developers.

The most common structure for joint development finance applications is a special purpose vehicle, typically a limited company formed specifically for the development project. The SPV is the borrowing entity and the registered owner of the development site, with the partners as directors and shareholders. This structure has several advantages: it ring-fences the project from the partners’ other business activities, it provides a clean corporate entity for the lender to deal with, and it simplifies the profit distribution at the end of the project through dividends or liquidation distributions.

The shareholding structure of the SPV should reflect the agreed equity contributions and profit split between the partners. If Partner A contributes 60% of the equity and Partner B contributes 40%, the shareholding is typically split accordingly. However, the profit split does not necessarily need to mirror the equity split, particularly where one partner is contributing capital and the other is contributing expertise, project management, or deal sourcing. These arrangements should be documented in a shareholders’ agreement that covers equity contributions, profit distribution, decision-making authority, dispute resolution, and exit provisions. Lenders will request a copy of the shareholders’ agreement as part of the application.

One common mistake is forming the SPV too late in the process. Lenders need the SPV to be the contracting party on the land purchase and the borrower on the facility, which means the company must be incorporated before contracts are exchanged on the site. We recommend incorporating the SPV as soon as the partnership is agreed and the project is identified, allowing time for the shareholders’ agreement to be prepared and the company’s bank account to be opened. The cost of incorporating an SPV is minimal, typically £50 to £200 through Companies House or a company formation agent, but the administrative steps take time and should not be left to the last minute.

Personal guarantees are standard in development finance and take on particular importance in joint borrower applications. A personal guarantee means that if the SPV cannot repay the loan, the guarantors become personally liable. In most joint applications, all directors and shareholders with more than a specified percentage of ownership, typically 20-25%, are required to provide personal guarantees. The guarantee is usually joint and several, meaning each guarantor is liable for the full amount of the facility, not just their proportionate share. This is a critical point that many borrowers overlook.

The joint and several nature of the guarantee means that if the project fails and Partner A has no assets, Partner B could be pursued for the entire outstanding debt, not just their 50% share. This risk needs to be understood by all parties before signing and should be reflected in the shareholders’ agreement, perhaps through indemnity provisions or a requirement for each partner to maintain minimum personal assets. We always recommend that each guarantor takes independent legal advice on the guarantee terms, as this protects both the individual and the lender and is often a formal requirement of the facility.

In some cases, it is possible to negotiate limited or capped personal guarantees where the guarantor’s liability is limited to a specified amount or percentage of the facility. This is more common for experienced developers with strong track records or for larger facilities where the quantum of the guarantee would otherwise be disproportionate. Negotiating guarantee terms is part of the overall facility negotiation, and having a broker who understands the lender’s flexibility on this point can save significant personal exposure. We routinely negotiate guarantee structures for our clients and can often achieve more favourable terms than borrowers would obtain by dealing with lenders directly. Contact us through our deal room to discuss your joint application.

Lenders are acutely aware that partnerships can break down, and a falling-out between co-directors during a development project is one of the worst scenarios for all parties. The project stalls, decisions are not made, the contractor loses momentum, costs escalate, and the loan falls into arrears. For this reason, lenders look for evidence that the partnership has a robust governance framework that can withstand disagreements.

The shareholders’ agreement should include clear provisions for dispute resolution, typically starting with mediation and escalating to arbitration if mediation fails. It should specify what happens if one partner wants to exit, including whether the remaining partner has a right to acquire the departing partner’s shares and at what price. Deadlock provisions, which apply when the partners cannot agree on a material decision, should specify a resolution mechanism such as a casting vote, referral to an independent third party, or a buy-sell mechanism. Without these provisions, a deadlock can paralyse the project and jeopardise the lender’s position.

From a practical perspective, we advise joint borrowers to agree upfront on the key decisions that require unanimous consent versus those that can be made by a single partner. Day-to-day project management decisions, such as approving contractor payments, instructing minor design changes, or managing the sales process, should be delegated to one partner to ensure the project runs efficiently. Major decisions, such as significant budget changes, alterations to the scheme, changes to the sales strategy, or decisions to refinance or extend the facility, should require agreement from all partners. Documenting these decision-making protocols in the shareholders’ agreement gives the lender confidence that the project will be managed effectively regardless of any interpersonal dynamics.

The tax implications of the borrowing structure should be considered before the SPV is formed and the facility is arranged. For individuals borrowing jointly outside a corporate structure, profits are taxed as income at their marginal rate, which could be up to 45% for higher rate taxpayers. Through an SPV, profits are subject to corporation tax at 25% for the financial year 2025-2026, with additional tax when funds are extracted as dividends. The optimal structure depends on the partners’ individual tax positions, the expected profit level, and whether profits will be reinvested in further developments or extracted.

Stamp duty land tax is another consideration. SPVs purchasing residential property pay the standard commercial rates if the property is a commercial building being converted, or the residential rates plus the 3% higher rates additional dwellings surcharge if the property is already residential. The SDLT treatment of the land or building acquisition should be confirmed with a tax adviser before exchange, as the additional 3% can amount to a significant sum on a high-value purchase. For a site purchased at £1,500,000, the additional SDLT would be £45,000, which must be funded from equity and factored into the development appraisal.

Legal costs for joint structures are higher than for single-borrower applications because there are additional documents to prepare and negotiate. Beyond the standard facility agreement, legal costs will include the preparation of the shareholders’ agreement, the personal guarantee documentation for each guarantor, any intercreditor documentation if mezzanine finance is involved, and potentially additional due diligence on each individual. Budget an additional £3,000 to £8,000 in legal costs for a joint borrower application compared to a single borrower, and ensure this is reflected in your development appraisal. Despite the additional cost, the benefits of a properly structured joint arrangement, including access to more capital, broader experience, and shared risk, typically far outweigh the incremental legal expense.

For developers exploring other funding options, we also arrange refurbishment finance and commercial mortgages. You may also find these guides useful: Planning Applications and Development Finance, Development Appraisals for Lenders, Multi-Unit Development Finance. Your development finance application should demonstrate compliance with Building Regulations and planning permission requirements. HM Revenue & Customs (HMRC) Stamp Duty Land Tax (SDLT) calculations must be accurate in your development appraisal. Lenders will verify your site's status with HM Land Registry and may require RICS-qualified professional reports including a quantity surveyor cost plan and a monitoring surveyor assessment.