Development Finance Calculator
Structure your capital stack with senior debt, mezzanine options, and equity analysis. Calculate funding requirements and assess lender appetite.
Project Costs
Enter your land acquisition and total build costs
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About the Development Finance Calculator
What it does and how it helps you
The Development Finance Calculator helps UK property developers structure optimal capital stacks for development projects. Calculate senior debt, mezzanine finance, and equity requirements with indicative rates and lender appetite assessments.
How It Works
Understanding the calculation method
The Development Finance Calculator is an essential tool for UK property developers looking to structure the optimal funding mix for their projects. Whether you're building residential apartments, converting commercial space, or developing new housing, understanding your capital stack is crucial to deal viability.
Understanding Development Finance
Development finance differs significantly from standard property loans. Instead of lending against existing value, development lenders assess the future potential of your project—the Gross Development Value (GDV). They'll typically provide funding against both your land acquisition and construction costs, with drawdowns released in stages as the build progresses.
The UK development finance market offers several funding layers:
Senior Debt (Primary Layer)
Senior debt forms the foundation of most development finance structures. Lenders typically offer 60-70% of total costs (Loan-to-Cost or LTC) for experienced developers. First-time developers may be limited to 55-60% LTC until they've proven their track record.
Senior rates in the current market range from 9-13% per annum, depending on: - Your experience and track record - The project's LTGDV (ideally under 65-70%) - Location and demand evidence - Planning status and construction risk - Exit strategy (pre-sales significantly de-risk)
Arrangement fees typically run 1.5-2.5% of the facility, with exit fees of 1-2%.
Mezzanine Finance (Stretch Layer)
When you need higher leverage but want to preserve equity, mezzanine finance bridges the gap. Sitting behind senior debt with a second charge, mezzanine can stretch total leverage to 80-85% of costs.
The trade-off? Higher rates of 15-20% reflect the increased risk position. Mezzanine providers are essentially providing quasi-equity at debt pricing. Calculate carefully—high mezzanine costs can significantly erode margins on tighter deals.
Equity Requirements
After debt layers, the remainder comes from equity—either your own capital or joint venture partners. The calculator shows exactly how much cash you'll need to close the deal and fund any shortfalls during the build.
How This Calculator Works
Our Development Finance Calculator structures your capital stack automatically:
1. Input Project Costs: Enter your land acquisition price and total build costs. The calculator combines these into your Total Development Cost (TDC).
2. Set GDV and Timeline: Provide your expected end value (GDV) and project duration. This calculates your gross profit margin and informs lender appetite.
3. Choose Leverage: Select your target senior LTC and whether to include mezzanine. The calculator shows resulting LTGDV to flag if you're pushing lender comfort zones.
4. Review Capital Stack: See your complete funding structure with indicative rates for each layer, total finance costs, and equity requirements.
Key Metrics Explained
- LTC (Loan-to-Cost): Total debt as a percentage of your development costs. Higher LTC means less equity needed but higher risk.
- LTGDV (Loan-to-GDV): Total debt as a percentage of end value. Most senior lenders cap at 65-70% LTGDV regardless of LTC.
- Profit on Cost: Your gross margin—the difference between GDV and total costs, divided by costs. Lenders typically want 15-20% minimum, with 20-25%+ attracting best terms.
- Net Profit on Cost: Your margin after deducting all finance costs. This is your real return if everything goes to plan.
- Return on Equity: Shows how hard your equity is working. A deal might have modest profit on cost but excellent ROE if highly leveraged.
Lender Appetite Assessment
The calculator assesses lender appetite based on your deal metrics:
- Strong Appetite: Profit on cost above 25% with LTGDV under 65%. Expect competitive terms from multiple lenders.
- Moderate Appetite: Profit on cost 18-25% with LTGDV under 70%. Solid deal but may need to approach several lenders.
- Weak Appetite: Tight margins or high LTGDV. Consider value engineering, reducing costs, or increasing equity.
Tips for Securing Development Finance
1. Build Your Track Record: Start with smaller projects to establish credibility. Joint ventures with experienced developers can help bridge the gap.
2. Secure Planning First: Lenders strongly prefer projects with full planning permission. Outline permission or subject-to-planning deals attract higher rates and lower leverage.
3. Evidence Demand: Pre-sales or reservations significantly de-risk your exit and can unlock better terms.
4. Consider Phasing: On larger schemes, phased facilities with profit recycling can reduce peak debt and improve returns.
5. Budget Realistically: Overly optimistic cost plans get caught during DD. Include 5-10% contingency and realistic professional fees.
When to use this calculator
Use this calculator during feasibility stage to understand funding requirements before making offers. Essential when structuring joint ventures to agree equity splits. Use it to compare different leverage scenarios—higher debt means less cash but more risk and interest cost. Review before approaching lenders to ensure your deal meets their criteria.
Frequently Asked Questions
Common questions about this calculator