Bridging loans and development finance are both short-term lending secured against property, but they fund different stages of a project. A bridge funds a purchase or lighter refurbishment in a single advance. Development finance funds ground-up builds and major conversions, releasing money in stages as the work progresses.
At a glance
| Bridging loan | Development finance | |
|---|---|---|
| Purpose | Fast purchases, auction, chain-break, refurbishment before a refinance | Ground-up development on land with planning, and major conversions |
| How funds are released | One advance at completion, with interest usually retained | A day-one advance against the land or site, then build costs released in stages, in arrears, as work completes |
| What the lender assesses | The property, the loan-to-value and the exit | The gross development value (GDV), the loan-to-cost ratio, the build budget and your track record |
| Term | Usually up to around 12 months | Set by the project — around 12 months for a small scheme, two to three years on larger ones |
| Monitoring | Generally none beyond the initial valuation | Stage inspections, with monitoring fees at each drawdown |
| Exit | Sale or refinance | Sale of the units, or refinance — including development exit finance once the scheme is complete |
What bridging finance funds
A bridge moves quickly and arrives in one piece. It suits a transaction where the property already exists and the job is to complete fast or hold it briefly — an auction purchase, a chain break, or a property that needs work before a term lender will mortgage it. The lender advances against the current value, the interest is usually retained rather than serviced, and the loan is repaid in one sum from your exit. Our bridging loans page covers the product in full.
What development finance funds
Development finance is built for projects that create value through construction: you have found land, you have planning permission, and now you want to build on it — or you are converting a building into something materially different. The facility has two parts: a day-one advance against the land or site, and the build costs — funded in full but paid in arrears, in stages, as the work is done and inspected. The lender sizes the whole facility against the gross development value and the loan-to-cost ratio, and looks hard at the build budget and your track record. The full picture is on our development finance page.
The middle ground: refurbishment
Lighter projects sit in between, and the right product depends on the depth of the works. A cosmetic or light refurbishment — kitchen, bathroom, redecoration — is normally funded with a refurbishment bridge: one advance, no stage monitoring. Once the project involves structural work, extensions or a change of use, lenders treat it as development and fund it in stages. If you are not sure which side of the line your project falls on, that is exactly the question to put to us — the answer changes the lender list and the cost structure.
How the costs differ in shape
Both products carry an arrangement fee and interest that is typically rolled up or retained rather than paid monthly, plus valuation and legal costs on both sides. Development finance adds a layer bridging does not have: stage inspections, with monitoring fees at each drawdown, because the lender is releasing money against work as it completes. On either product, rates and fees move with the market and the risk, so we quote against your actual case rather than a headline figure.
Which do you need?
Ask what the money is for. Buying or briefly holding something that already exists — bridging. Building something, or substantially rebuilding it — development finance. Finishing a scheme and needing breathing room before sale — development exit finance. Each needs the same thing underneath: a clear, evidenced exit, which is the part we pressure-test before any lender is approached.
Frequently asked questions
Can I use a bridging loan for a development project?
For lighter works, yes — a refurbishment bridge funds the purchase and works in one advance. Once the project involves structural building work, ground-up construction or a major conversion, development finance is the designed tool: it releases funds in stages against the build programme.
Is development finance more expensive than bridging?
Both are priced on risk, and the answer depends on the project, the leverage and your track record rather than the product label. Rates and fees move with the market, so we quote against your actual case rather than a headline figure.
What is development exit finance?
A facility that replaces your development loan once the scheme is complete or nearly complete — typically to reduce cost or buy time to sell the units. It is the bridge between practical completion and your final sale or refinance.
Do both products need an exit strategy?
Yes. Both are short-term loans repaid in full at the end — from a sale or a refinance. The exit is the single most important feature of either facility, and it is the part we pressure-test hardest before recommending a lender.
Talk to an adviser
Describe the site, the works and your intended exit, and we will tell you which product fits and who is likely to fund it. Call 020 7126 8574 or request a call back — we aim to reply within one working day.
Your property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it. Most bridging and development loans on investment property are not regulated by the Financial Conduct Authority.
Propertyze is a trading style of City Finance Brokers Ltd, authorised and regulated by the Financial Conduct Authority, FCA No. 766295.
To put numbers to your own scenario, use our bridging loan calculator or our development finance (GDV) calculator.
Related specialist finance
Bridging loans · Development finance · Bridging for refurbishment · Development exit finance