Development Finance vs Bridging Loans in 2026: What You Need to Know

As we move into 2026, specialist property finance remains one of the most powerful tools for developers, investors, and property professionals. But knowing the difference between development finance and bridging loans, what lenders typically require, and how to use each product to your advantage is essential if you want the best terms and to keep your projects moving.

At LivFinance, we specialise in helping clients secure competitive, structured funding. Below is a simple, bold guide to what you need to know.

What is a Bridging Loan?

A bridging loan is a short-term, fast solution—typically 3–18 months—secured against property. It is used to “bridge the gap” between a purchase and an exit strategy, such as refinancing or a sale.

• Key Feature: Speed. Bridging loans are designed for quick completions, auctions, chain breaks, cashflow, or light refurbishments.

• Repayment: Must have a clear exit (sale or refinance).

• Leverage: Often up to 75% Loan-to-Value (LTV).

• Costs: Interest can be retained, rolled-up, or serviced, plus arrangement, legal, valuation and exit fees.

When to use a bridging loan:

• To secure a property quickly before selling another.

• Auction purchases.

• To fund refurbishments before refinance.

• Development exit finance – giving time to market and sell units after practical completion.

What is Development Finance?

Development finance is structured lending designed to fund construction or major conversions. It covers both the land and build costs in staged drawdowns, released against a surveyor’s monitoring reports.

• Key Feature: Funding for heavy or ground-up projects.

• Leverage: Typically 75–85% of costs (Loan-to-Cost) and 60–70% of Gross Development Value (GDV).

• Costs: Monthly interest plus arrangement fees, monitoring surveyor fees, valuation and legal costs.

• Repayment: Usually through the sale of the completed units or refinance.

When to use development finance:

• Ground-up construction of residential or commercial units.

• Conversions requiring planning and significant works.

• Projects with clear GDV and sales strategy.

What Lenders Typically Require

For Bridging Loans:

• Strong exit strategy – the most important element.

• Security – property with enough equity.

• Valuation and legal due diligence.

• Credit and experience – lenders want to know you can deliver.

For Development Finance:

• Full planning permission in place (most lenders require this before drawdown).

• Borrower experience – ideally at least two similar completed projects, or a strong contractor team.

• Equity contribution – typically 10–30% of project costs.

• Detailed appraisal – build costs, contingency, professional fees, sales values.

• Exit plan – sales or refinance.

Typical Costs

• Bridging Loans: Interest charged monthly, usually higher than traditional mortgages, plus arrangement, valuation, legal and possible exit fees.

• Development Finance: Interest plus arrangement, monitoring surveyor, valuation and legal fees. Rates and terms improve significantly for experienced developers with strong schemes.

How to Maximise Approval and Better Terms

• Lead with your exit strategy – show lenders how and when they will be repaid.

• Provide a professional, complete pack – appraisal, costings, drawings, CVs, planning approval.

• Keep leverage realistic – stay within lender comfort zones (LTC/LTGDV).

• Factor in fees and time – lenders will scrutinise your budget.

• Build your track record – lenders price in experience.

Summary

• Bridging Loans = Fast, flexible, short-term solutions. Perfect for acquisitions, auctions, chain breaks, light refurbishments, or exits.

• Development Finance = Structured staged funding for construction and conversions. Best for ground-up or heavy projects with strong GDV.

• Both require clear exits, realistic leverage, and a professional presentation.

Take Your Next Step with LivFinance

At LivFinance, we bring over 50 years of experience in property development and property finance. We work directly with developers and investors to package applications, negotiate with lenders, and secure the best possible terms across bridging loans, development finance, exit funding, and mezzanine finance.

Whether you’re purchasing at auction, building from the ground up, or refinancing a completed scheme, we can help.

📧 team@livfinance.co.uk 📞 020 3603 0677 🌐 www.livfinance.co.uk

Contact LivFinance today and let’s move your project forward.