Author: Mark Harrison.
Mark is the Managing Director of Breeze Capital and has over 30 years experience in bridging loans & development finance. You can check out his LinkedIn profile here.
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Get Your Numbers Right When It Comes to Development Finance
There’s a particular type of optimism that grips people when they find a development site. The land looks right, the location feels right, and somewhere in the back of their mind a number appears — the profit they’re going to make. The problem is that number is usually wrong. Not because developers are reckless, but because getting the figures truly right is harder than most people expect, and the consequences of getting them wrong are severe.
Development finance lenders are not unsympathetic people, but they are experienced ones. They’ve seen plenty of borrowers arrive with numbers that look plausible on a spreadsheet and unravel on a building site. If you want to borrow sensibly, complete successfully, and actually make money at the end of it, your figures need to be more than a rough estimate with a generous gut feeling attached.
Build Costs: The One That Catches Everyone Out
Ask ten developers what their build cost per square foot is and you’ll get ten different answers — and probably a few that are quietly wishful. Build costs vary enormously depending on the type of construction, the specification level, the location, ground conditions, and the contractor you’re using. A figure that worked on your last project in the Midlands won’t necessarily hold on a new-build scheme in London, or on a conversion with an old party wall agreement waiting to become a problem.
Get a proper quantity surveyor involved early. Not at the point of application — before it. A QS-prepared cost plan carries real weight with lenders and, more importantly, gives you an honest baseline to work from. Contingency isn’t a luxury either. Build in at least 10—15% on top of your projected build cost, because something will go wrong. It always does.
Professional Fees: The Line Items That Add Up
Architects, planning consultants, structural engineers, project managers, building control, warranty providers — these fees are easy to underestimate because they tend to arrive at different stages of the project rather than all at once. That drip-drip nature makes them psychologically easy to overlook in the early modelling, but they can collectively represent a significant chunk of your total costs.
Be thorough and be specific. Get quotes rather than assumptions, and map out when each fee is likely to fall due. Lenders will want to see these accounted for, and more importantly, your cashflow needs to absorb them without a crisis.
Finance Costs: Don’t Pretend They’re Small
Development finance isn’t cheap, and it shouldn’t be treated as a footnote in your appraisal. Interest is typically charged on drawn funds, which means it rolls up as the build progresses — but arrangement fees, exit fees, monitoring surveyor costs and legal fees all need to be factored in from the start. Model your finance costs against a realistic draw-down schedule, not an optimistic one, and consider what happens if the project runs two or three months longer than planned. Because it might.
Selling Costs: The Final Sting
Estate agent fees, sales legal costs, stamp duty implications for buyers affecting your pricing strategy, marketing — none of these are trivial. If you’re selling multiple units, they mount up fast. Some developers build in a sales period contingency too, particularly in slower markets where units might not shift the week they’re listed.
The Bigger Picture
Lenders will stress-test your numbers. They’ll look at your Gross Development Value and want to see a loan-to-GDV ratio that gives everyone a reasonable cushion. If your figures are vague, inflated, or missing whole categories of cost, that conversation will be a short one.
The developers who build strong relationships with lenders — and keep coming back — are the ones who present numbers they can defend, have clearly thought through the risks, and treat accuracy as a professional standard rather than an inconvenience.
Get the numbers right first. Everything else follows from there.
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