Bridge First, Then Development Finance: When Bridging Comes First

Bridging loans are short-term secured loans designed for speed. They bridge a gap between a purchase and a longer-term finance solution, or provide rapid capital for auction purchases, chain-breaks, or time-sensitive acquisitions.

Rates start from 0.55% per month (approximately 6.6% per annum), with terms from 1 to 18 months and LTV up to 75%. Unlike development finance, bridging loans are typically advanced as a single drawdown against the current value of the asset.

The key advantage is speed - funds can be available within 5-10 working days, compared to 4-8 weeks for a development facility.

Rates: Development finance from 6.5% p.a. vs bridging from 0.55% p.m. (6.6% p.a.). On the surface they look similar, but development finance interest is typically rolled up and only charged on drawn funds, while bridging interest accrues on the full advance from day one.

Loan-to-Value: Development finance offers up to 65-70% LTGDV (based on the completed project value). Bridging offers up to 75% LTV based on the current or purchase value of the asset.

Terms: Development finance runs 12-24 months to match the build programme. Bridging is shorter at 1-18 months. Both carry exit fees and potential extension charges if you overrun.

Drawdowns: Development finance uses staged drawdowns tied to build milestones. Bridging is a single day-one advance. This makes development finance more cost-efficient for projects with significant build periods.

Fees: Both typically carry 1-2% arrangement fees. Development finance adds monitoring surveyor costs (£500-£1,500 per inspection). Bridging may have exit fees of 1-1.5%.

Choose development finance when you are undertaking a ground-up build, heavy structural conversion, or any project where the end value significantly exceeds the current site value. The staged drawdown structure means you only pay interest on capital as you need it.

Development finance is also the right choice when the project timeline exceeds 6 months, when you need to fund both land and build costs, or when you need to demonstrate to planning authorities or JV partners that you have an institutional-grade funding facility in place.

Typical projects: new-build residential schemes (3-100+ units), office-to-residential conversions, commercial developments, and mixed-use schemes.

Bridging loans are the right tool when speed is the priority. Auction purchases with 28-day completion deadlines, securing a site before planning is granted, breaking a property chain, or acquiring a property that needs light refurbishment before refinancing onto a mortgage.

They also work well for short-term holds where you plan to sell within 6-12 months without significant works, or when you need to release equity from an existing asset quickly to fund a deposit elsewhere.

Do not use bridging for ground-up development - the single drawdown and shorter terms make it significantly more expensive than a proper development facility for projects over 6 months.

Because the development lender values the site with planning in place, any uplift in value achieved during the bridge term can count towards your equity in the development facility. The bridge only has to cover the purchase, not the build; for how the two compare on total cost, see our worked cost example.

The bridge-first route gives you the speed of bridging with the cost efficiency of development finance for the build, provided the bridge is set up with the refinance in mind.

We arrange both facilities together, making sure the bridging lender's terms allow early repayment without penalty (or with minimum interest periods you can live with) when the development facility is ready to draw, and that the term leaves enough time for planning to be decided. Contact us to discuss your specific scenario.

For developers exploring other funding options, we also arrange mezzanine finance and refurbishment finance. You may also find these guides useful: Site Value vs Completed Value, Development Finance vs Bridging Loan, Section 106 & Affordable Housing Finance Guide. When comparing property finance options, consider the regulatory framework: the Financial Conduct Authority (FCA) regulates certain types of lending, while RICS standards govern valuations across all product types. HM Land Registry registration applies to all secured lending, and Building Regulations compliance affects the exit valuation regardless of which finance product you use.