Development finance is not one loan. It is a small advance against the land plus a build facility drawn in stages, and you only pay interest on what has been drawn. That is why the headline rate tells you almost nothing about the cost. This models the drawdowns month by month.
Development finance drawdown calculator
Non-regulated, business purpose development lending. Nothing is sent anywhere and nothing is stored.
1. The scheme
2. The facility
How drawdowns actually work
You draw the land advance at completion, then the build facility in stages as work is done. A monitoring surveyor inspects and signs off each stage before the lender releases funds, and releases are almost always in arrears, meaning you pay the contractor first and get reimbursed afterwards. That lag is the single most common cause of cashflow trouble on a scheme that looks fully funded on paper.
Because interest only runs on drawn funds, the debt starts small and climbs through the build. This calculator steps through it month by month, adding a slice of the build facility and then compounding interest on the balance, which is why the interest figure is far lower than the rate applied to the whole facility for the whole term. On the default figures the facility is £1.1m but the interest is closer to what you would pay on £800,000, because that is roughly the average balance.
Peak debt and the two caps
Peak debt is the balance at redemption once all drawdowns and rolled up interest are in. Lenders cap it two ways, and both have to pass:
- Loan to gross development value. Peak debt against GDV, typically limited to somewhere around 65% to 70%. Watch this figure move as you extend the term, because rolled up interest pushes peak debt up while GDV stays still.
- Loan to cost. The facility against total project cost, which controls how much of your own cash has to go in.
Extending the term does not just cost more interest. It raises peak debt, which raises loan to gross development value, which can take a deal outside a lender’s policy entirely.
Profit on cost is what gets it approved
Lenders want to see enough margin in the scheme to absorb an overrun or a softer sale. Profit on cost is profit divided by total costs including finance, and a scheme that only works if everything goes right is a scheme most development lenders will decline. If the figure looks thin, test it: drop the GDV by ten percent and add three months to the term, and see what is left. That is roughly the stress a credit committee will apply.
What this does not model
- Monitoring surveyor fees, valuation, legals and any broker fee. Those sit on top of the figures shown.
- Stamp duty on the land purchase.
- Mezzanine or equity layered above the senior facility.
- VAT timing, which on a commercial or mixed scheme can be a substantial working capital swing on its own.
- Staged sales during the build reducing the balance early.
The model assumes the build facility is drawn evenly across the term. Real drawdowns follow an S curve, slower at groundworks and faster through the middle, so treat the interest figure as an estimate rather than a quote.
Before the facility is in place
Land is often bought before development finance can be arranged, particularly at auction or where planning is not yet granted. That interim is a bridging question, and our bridging loan cost calculator will price it. Once the scheme is finished, the exit is either sales or a refinance onto a term facility, and our commercial mortgage affordability calculator will show whether the completed income supports holding it.
Get the scheme costed properly
Development pricing depends on your track record, the planning position, the contract and the exit, and it varies widely between lenders on the same scheme. Send us the appraisal and we will tell you what the facility would actually look like, including whether a mezzanine layer makes the numbers work.
Or try our other calculators.
This calculator is provided for illustration only and does not constitute financial advice, an offer of finance, or a development appraisal. It assumes even drawdowns and rolled up interest, and excludes several real costs listed above. Bolton Business Finance Ltd is not authorised or regulated by the Financial Conduct Authority and arranges non-regulated, business purpose development finance only.