Senior Development Debt: the foundation of every funding stack
The core development loan: first charge, lowest rate in the stack, funding land and build. How pricing, leverage and lender appetite actually work in the current market.
Talk to Ashley about your scheme
What senior debt covers
Senior development debt typically advances part of the land cost, often around half to two-thirds of it, then up to 100% of the build costs in staged releases. The overall facility is capped at around 65% of GDV, with total-cost cover typically between 70% and 85% depending on the lender, and whichever cap bites first decides your number. It takes a first charge over the site, and drawdowns run in arrears against monitored progress.
Run the numbers on your own scheme with the development calculator and you'll see which cap bites and what equity that leaves you to find.
"Senior lenders differ less on rate than on behaviour: how fast they release stages, how they treat a two-week overrun, whether their monitoring surveyor is a partner or a handbrake. That's what I actually shop for."
Pricing and fees
Development pricing is set case by case against the scheme, your experience and the leverage, and it moves too often for a published table to stay honest. The pattern that does hold: bank and challenger money is cheapest and slowest, at the lowest leverage. Specialist development lenders price higher and stretch further. The highest leverage costs the most, and is often better solved with mezzanine or JV equity sitting on top of cheaper senior debt.
Around the rate: an arrangement fee of typically 1% to 2%, an exit fee of around 1% charged on the loan or, watch for this, on GDV, plus monitoring and legals. We compare lenders on total cost of funds across the whole programme, not the headline rate.
Where senior debt sits in the stack
Senior debt is the bottom layer and the cheapest money in the deal. Everything else is built on top of it, and each layer above costs more because it's repaid later and carries more risk:
Your questions
What is senior debt in property development?
The first-charge loan at the bottom of the funding stack: lowest risk, lowest rate, first to be repaid. Everything else, mezzanine, JV equity, your own cash, sits behind it.
Should I use a bank or a specialist development lender?
Banks are cheaper and slower, at lower leverage. Specialists move faster and stretch further, for a higher rate. Which wins depends on your timeline and how much equity you have, and we run both against your scheme.
Do I need a personal guarantee for development finance?
Almost always, in some form: it's a standard feature of nearly every UK development facility. Limited guarantees commonly cap your exposure at somewhere around 15% to 30% of the facility, and cost-overrun guarantees are a frequent middle ground. Truly non-recourse deals exist but are rare and lower-leverage. We explain the real exposure in plain English before you commit to anything.
Are exit fees charged on the loan or on GDV?
The crucial small-print item. A GDV-based exit fee can dwarf the rate difference between two lenders, so it's the first thing we check in any set of terms.
How much of the land cost will senior debt fund?
Commonly around half to two-thirds, with the balance coming from your equity or from mezzanine. The build costs are the part lenders fund most generously, often in full, because that money is released against work already signed off.
What happens if the build overruns?
This is exactly where lender behaviour matters more than the rate. Some extend on a phone call, some charge heavily, some do neither quickly. It's worth asking us how a given lender has actually behaved rather than what their terms say they might do.
Got a deal like this on your desk?
Tell us the numbers and we'll tell you honestly what's achievable.
Prefer to put it in writing? Email support@bridgingfinancebroker.co.uk