Bridging finance vs development finance

What is bridging finance?

Bridging finance is a short-term loan, usually up to twelve months, secured against an existing property and advanced as a single lump sum. Its purpose is to bridge a gap: to complete a purchase quickly, to secure a site before slower funding arrives, or to release capital while a sale or refinance lands. It is sized on the value of the security, typically up to around 70 to 75% loan to value, priced at a monthly rate, and repaid in full from a defined exit. Speed is its defining feature, which is why it is dearer than longer-term debt.

A bridge does not fund construction. It rests on an asset that already exists and a clear plan to repay, not on a build programme. That is what lets it complete in days to a few weeks, where a build facility takes longer to underwrite. A developer uses a bridge for the fast first move, securing a site or winning an auction, or the fast last move, exiting a finished scheme, with the heavier funding sitting in between.

What is development finance?

Development finance is a facility that funds the construction of a scheme, drawn down in stages as the building rises. It is sized on two tests applied together: loan to cost, the loan against total development cost, commonly around 60 to 65%, and loan to GDV, the loan against the gross development value of the finished scheme, commonly around 70 to 75%. The lender lends the lower of the two. Interest usually rolls up because the site earns nothing while it is built, and an independent monitoring surveyor certifies each drawdown against the cost plan.

Where senior development debt does not reach the leverage a developer wants, a mezzanine layer or equity can stretch total leverage to around 80 to 90% loan to cost at a higher cost. Development finance runs for the build period plus a lease-up or sales allowance, then exits at completion through a sale, a forward sale or a refinance. It is the heavy-lifting money that turns a site into finished homes.

When to use bridging and when to use development finance

The choice turns on what the money has to do. If the need is to move fast on an existing asset, secure a site, win an auction, release capital, bridge to a sale, with no ground-up construction involved, bridging is the tool. If the need is to fund the building of a scheme from the ground up, with staged drawdowns matched to construction, development finance is the tool. A light refurbishment that adds value sits with a bridge; a substantial structural build sits with development finance.

The grey area is heavy refurbishment or conversion. A scheme that strips out and reconfigures a building, or converts it to a new use, can fall to either a heavy refurbishment bridge or a development facility depending on the scale of works and how the lender views the risk. We assess where a given scheme sits and arrange the structure that fits it, rather than forcing it into the wrong product.

The key differences side by side

The two tools share a short-term, interest-rolled, secured-against-property nature, but they differ on almost every detail that matters to a developer.

The similarities matter too. Both are short-term, both usually roll up interest, both are secured against the property and both are repaid from a defined exit rather than from monthly income. A developer who understands the differences in drawdown, sizing, term and cost can pick the right tool for each phase, and often uses both across a single scheme.

Lending criteria for each

A bridging lender focuses on the value of the security and the strength of the exit. It wants to see the asset, a realistic value, and clear evidence of how and when the loan will be repaid, a sale agreed, a refinance lined up, or development finance ready to follow. The developer's track record matters less than on a build facility, because there is no construction risk to manage; the asset and the exit carry the case.

A development lender underwrites far more. Alongside the lower of loan to cost and loan to GDV, it weighs the build contract and the contractor, the planning status, the developer's track record and the credibility of the exit. Full planning consent and a fixed-price build contract with an experienced contractor open the best terms; a first-time developer or a scheme awaiting planning borrows from a narrower pool. The bridge is underwritten on the asset; the development facility is underwritten on the whole scheme and the people delivering it.

How the two combine on a build to rent scheme

On a real build-to-rent scheme the two tools work in sequence, each suited to a phase. First, a bridge secures the site, completing fast to win it, often ahead of planning so the developer captures the uplift when consent is granted. The bridge is sized on the current site value and repaid once the next facility is in place. This is the fast first move.

Second, development finance takes over to build the scheme out, drawn in stages against the lower of loan to cost and loan to GDV, with the GDV resting on the stabilised net operating income capitalised at the market yield. Third, at practical completion, a development exit bridge or a refinance repays the development loan and lowers the cost of carry while the scheme lets up to stabilisation, before a long-term investment refinance or a sale to an investor. UK build-to-rent investment reached about £5.3bn in 2025 (Savills), so the funders for each link are active, and we arrange across all three so the sequence is planned from the outset. All figures are indicative and never an offer of credit, and any regulated case is referred to an authorised firm.