Property development finance, Scotland short-term funding for land acquisition to construction and sale

Property Development Finance Explained

31 May 2024

Property development finance in Scotland is a type of short-term funding that supports the various stages of a development project, from land acquisition to construction and sale. It is used by property developers, investors, and landlords who want to undertake large-scale building or renovation works. In this article, we will explain how property development finance works, what are the pros and cons of using it, and how to apply for it.

Property development finance guide

What is property development finance?

Property development finance is a form of advanced loan that allows developers and builders to raise funds towards the purchase price of property (or land), as well as providing the necessary development costs for building, converting or refurbishing it. Unlike traditional loans, property development finance works by taking the value of the property on completion into consideration – with the expectation being that the value of the building will have increased by the end of the financing period. This enables builders and investors the opportunity to undertake high-profit schemes that would usually be out of reach and budget, whilst receiving a greater return on their investment.

Funding a Property Development Project.

If the borrowing requirement is between £750,000 to £50,000,000 and typically for a period between 12 and 30 months for a ground up residential development of 6 or more units or a large-scale commercial to residential conversion then traditional property development finance will be required. This type of loan is specifically designed for larger and more complex projects, with longer repayment terms and more stringent eligibility criteria.

Or, on the other hand if the borrowing requirement is between £50,000 to around £2,000,000 for a single unit buy to flip refurbishment property, a bridge to let project, an auction property purchase, a commercial to residential conversion or a small new build development of up to 6 units then a bridging loan in Scotland can be tailored to meet the specific needs of each project.

In certain situations, developers can borrow up to 100% of the property or land purchase price with the development costs drawn down in tranches.

With the right documentation and a solid development appraisal, developers can secure the necessary funds to bring their projects to life.

Popular uses for Property Development Finance.

Build to Sell Development Finance

In the realm of property development, “build to sell” finance is a strategic cornerstone, enabling developers to transform vision into tangible assets. This financing model is tailored for projects destined for sale upon completion, often necessitating a meticulous balance between construction costs and market forecasts. Developers must navigate a complex web of regulatory requirements and market conditions, where securing competitive interest rates hinges on a thorough risk assessment and a robust exit strategy. Repayment of the development finance would typically come from the sale of the completed development project.

Build to Rent Development Finance

Build to Rent Development Finance is a specialised loan designed for professional property developers and landlords with an eye on the burgeoning rental market. Unlike traditional property development loans, BTR finance is tailored to support the construction of properties intended solely for renting. This financial solution effectively bridges the gap between the upfront costs of development and the subsequent rental income.

The duration of property development finance is usually between 6 and 24 months, depending on the scale and complexity of the project. The development loan is typically repaid by refinancing it with a long-term mortgage.

What are the advantages of property development finance?

Property development finance has many advantages over other forms of finance, such as:

  • It provides the opportunity to take on larger projects with a better return on investment (ROI).
  • It is appealing to borrowers who require funds to increase the value of a property.
  • It offers a quick way to raise capital, with funds being made available in a matter of days.
  • It is short term and doesn’t require a substantial proportion of cash to be tied down for years to come.
  • It covers both the purchasing cost of a property as well as contractors and materials.
  • It allows developers to undertake multiple projects simultaneously, without waiting for an existing project to complete.

How to apply for property development finance?

If you are interested in applying for property development finance, you will need to prepare a detailed business plan and feasibility study for your project. This should include:

  • A description of the property, its location, and its current and future use.
  • A breakdown of the purchase price, the development costs, and the expected sale price or rental income.
  • A timeline of the project, including the planning permission, the construction phases, and the completion date.
  • A cash flow forecast, showing the income and expenses of the project, and the repayment strategy.
  • A risk analysis, identifying the potential challenges and mitigating factors of the project.
  • A portfolio of your previous development projects, demonstrating your experience and track record.

Obtaining property development finance can be complex, once you have gathered all the necessary information and documents, you can approach an experienced property development finance broker who specialises in property development finance to assess your project and guide you through the process.


Property development finance is a useful tool for property developers, investors, and landlords who want to undertake large-scale building or renovation works. It works by providing funds in stages, based on the value of the property on completion. It has many benefits, such as allowing you to take on bigger and more profitable projects, but also some drawbacks, such as being more complex, risky, and expensive than other forms of finance.

Comments on this guide to Property development finance article are welcome.

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