Securing 100% development finance is possible in the UK property market, but it is reserved for a specific type of developer and project. It is not commonly available through standard lending routes and should not be viewed as an automatic option, even for profitable schemes.
That said, under the right circumstances, it can be structured. This article outlines when and how full development funding is achievable, what lenders expect, and whether it may be suitable for your next project.
What is 100% development finance?
Typically, property developers are expected to contribute between 30% and 40% of a project’s costs, whether through land acquisition, build costs, or associated professional fees. However, 100% development finance covers the entire capital requirement; land, construction, and often soft costs.
This type of funding is rarely offered as a single loan product. Instead, it is usually structured through a combination of:
- Joint Venture (JV) finance
- Mezzanine finance layered on senior debt
- Or private equity partnerships
These structures enable a developer to proceed without injecting their own capital in exchange for a portion of the project’s returns or profit.
When is 100% finance offered?
Lenders and private funders offering full development finance operate with stringent criteria. They are not investing blindly; their priority is risk mitigation and return on capital. Typically, they will consider 100% funding when:
1. The developer has a proven track record
Experience is essential. Lenders want to see completed, profitable developments of a similar type and scale. Demonstrating delivery of previous projects on time and within budget is critical.
2. The scheme offers strong profit margins
Most lenders will seek a minimum GDV margin of 25–30%. If the scheme is underpinned by robust valuation evidence and demonstrates clear demand or exit potential, it stands a stronger chance of being funded.
3. Additional security is available
Developers may be asked to provide additional security, such as a charge over another property or asset. This reduces the funder’s risk exposure and strengthens the proposal.
4. A JV or profit-share structure is acceptable
In many cases, full funding is provided through a joint venture. The developer brings the opportunity and delivery capability, while the funder supplies the capital. The returns are then split based on an agreed structure, with the funder often receiving the majority share.
Who provides this type of finance?
Specialist brokers and intermediaries, such as ourselves, are typically the first port of call for this type of finance. They work with a wide network of lenders, family offices, and institutional funds that are open to joint ventures or mezzanine-backed full funding.
We work with a wide network of lenders including joint ventures and those who can source mezzanine funding.
Key considerations
While the concept of 100% funding is attractive, developers must approach it with a clear understanding of the trade-offs involved:
- Diluted returns: In exchange for capital, the developer often gives up a significant share of profits.
- Greater oversight: Funders may require increased reporting, project monitoring, and control over key decisions.
- Stringent due diligence: The project’s viability, planning status, costings, and end value will all be closely scrutinised.
Developers without a strong delivery record or access to additional security may find it challenging to secure this type of funding.
Conclusion: Is 100% development finance right for you?
If you have a profitable development opportunity, a solid track record, and are open to equity-style funding models, then 100% financing may be a viable solution. However, it is not suitable for first-time developers or high-risk schemes with unproven exits.
Before proceeding, it’s advisable to consult with a specialist development finance broker who can assess your position, structure the right deal, and introduce you to appropriate funders.
Need guidance on structuring your project for 100% finance?
Speak to a specialist here at developmentfinance.com to explore your options and understand what lenders are looking for. Call us today on 01164645514.