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Commercial Development Finance Explained Clearly

The industry for commercial development finance has seen substantial growth in recent years.

With the rise of urbanisation and the increasing demand for modern commercial properties, lenders and investors are more active than ever.

This article aims to answer any questions developers, business owners and investors may have whilst also pointing you in the right direction taking your next step.

What is commercial development finance?

Commercial property development finance is a specialised form of funding designed to support the construction, renovation, or conversion of commercial properties.

It provides the necessary capital to cover various stages of a development project, from land acquisition and planning to construction and finalisation.

This type of development of finance is typically used by property developers, investors, and businesses looking to expand operations or improve their commercial real estate portfolio.

Benefits of Commercial Development Finance

Commercial development finance provides numerous advantages for developers:

  1. Access to Significant Funds: It allows for large-scale investments that might be impossible with personal capital alone.
  2. Flexible Repayment Terms: Tailored repayment schedules to suit project timelines and cash flow can be negotiated.
  3. Enhanced Project Scope: With adequate financing, developers can have expansive visions and execute them efficiently.
  4. Risk Mitigation: Lenders often conduct thorough due diligence, which can highlight potential issues in a project, thereby providing an additional layer of risk management.

Key Steps to Secure Commercial Development Finance

To secure commercial development finance, a structured approach is essential:

  1. Detailed Project Plan: Comprehensive documentation, including feasibility studies, profit projections, and detailed architectural plans, should be presented.
  2. Strong Credit History: A robust credit profile significantly enhances the likelihood of securing favourable terms.
  3. Experienced Team: Demonstrating a knowledgeable and experienced development team can instil confidence in potential lenders.
  4. Clear Exit Strategy: Lenders will want assurance on how the loan will be repaid, be it through sale, refinancing, or another viable exit.

Feasible Commercial Development Finance Projects

Developing for Sale

When embarking on a new development project, commercial development finance can assist in covering both initial and ongoing costs. This financing enables you to purchase the initial plot of land and subsequently secure additional funds for the building work.

Lenders will evaluate the end value of the property during the application process. Typically, they inspect the site at various stages of development to ensure everything is progressing as planned before releasing the next tranche of funds. Borrowers are usually charged for these inspections.

Upon project completion, the property is sold to repay the loan, ideally generating a profit.

Developing for Investment

Securing commercial development finance for properties you intend to retain follows the same process as developing for sale.

The key difference is that you will repay the loan with a commercial mortgage (or a semi-commercial mortgage if the property includes residential elements).

When refinancing, you have a couple of options:

Leverage Higher Property Value:

If the property is worth significantly more than your project costs, you can use this increased value to enhance your borrowing power on the mortgage.

Release Cash from Increased Value:

Alternatively, you can release some of the increased value as cash and use the remainder for long-term borrowing.

Building for Your Business

You can also develop a commercial property to house your own business. In such cases, the lender will assess the expected value of the premises at the end of the build, as if it were to be sold on the open market.

The commercial development finance lender will require you to have exit finance arranged, such as a commercial mortgage or development exit finance, to pay off the development finance.

The commercial mortgage lender will evaluate your business's performance to determine if the payments are likely to be affordable.

Should I use a finance broker?

Definitely! Using a commercial development finance broker can be highly beneficial.

Here are some reasons why you might want to use a finance broker:

Expertise and Knowledge

Finance brokers have extensive knowledge of the lending market and can provide expert advice tailored to your specific needs. They understand the intricacies of various financial products and can help you navigate the complexities involved.

Access to a Wide Range of Lenders

Brokers have access to a broad network of commercial development finance lenders, including those not typically available to the general public. This means they can find competitive rates and terms that you might not be able to secure on your own.


Searching for the right lender and comparing different loan options can be time-consuming.

A broker can do this legwork for you, saving you valuable time and effort.

Negotiation Power

A Commercial development finance Broker will often have established relationships with lenders and can negotiate better terms and rates on your behalf.

This can result in more favorable loan conditions and potentially lower costs.

Tailored Solutions

A finance broker can assess your unique financial situation and recommend the most suitable financing options.

They can tailor their advice to ensure the loan meets your specific requirements and exit strategy.

Simplified Process

The application process for a loan can be complex, involving various documentation and legal requirements.

A broker can guide you through each step, ensuring all paperwork is correctly completed and submitted.


While brokers charge a fee for their services, the savings they can secure through better loan terms and rates often outweigh the cost. A

dditionally, they can help you avoid potential pitfalls that could result in costly mistakes.

Ongoing Support

A good broker will provide ongoing support throughout the loan term, assisting with any issues that arise and helping you manage your repayments effectively.

In summary, using a finance broker can provide you with expert guidance, access to a wider range of lenders, and potentially better loan terms, making the process of securing finance smoother and more efficient.

Finance Nation

If you want to dive straight into exploring development finance options, you're already in the right place.

We're a finance broker who understands the challenges faced by people looking for the most time and cost-effective solutions, and we're here to help.

With our cutting-edge Fintech platform, we ensure seamless access to tailored finance solutions that suit your needs.

With access to lending products you won't find elsewhere, we'll identify the best deal for you and keep things moving until the funds are where they need to be. 

Contact us now and we will arrange a call to discuss your financial needs along with your next best step forward!


1. Can I get 100% commercial development finance?

Obtaining 100% commercial development finance is rare and typically not offered by most lenders.

Generally, lenders require the borrower to contribute a portion of the project's costs, often ranging from 10% to 30%.

However, in some cases, experienced developers with a strong track record and valuable collateral may negotiate higher loan-to-value ratios.

2. Are there specific eligibility criteria for commercial development finance?

Yes, while specifics can vary by lender, general criteria include a sound business plan, proof of experience in similar projects, a solid credit score, and a clear repayment strategy.

3. How does commercial development finance differ from a standard business loan?

Commercial development finance is specifically tailored for property development projects, often offering larger sums and more flexible terms compared to standard business loans, which may not provide sufficient capital for such extensive undertakings.

4. What kind of interest rates can be expected?

Interest rates for commercial development finance can vary significantly based on the project's risk profile, the lender's policies, and market conditions.

Typically, rates are higher than residential mortgages but competitive within the commercial lending market.

5. Is a personal guarantee required for commercial development finance?

In many cases, lenders may require a personal guarantee, especially for higher-risk projects or when the developer lacks a substantial track record.

This acts as an additional security measure for the lender.

6. What types of projects can commercial development finance fund?

Commercial development finance can fund a range of projects, including office buildings, retail spaces, industrial units, and mixed-use developments.

It can cater to both new constructions and significant refurbishments.