Bridging Loans vs Development Finance:
Which Suits Your Project?

When funding a property project, it’s easy to get confused between bridging loans and development finance. Both offer short term, flexible funding but they’re designed for different stages and types of projects. In this guide, we’ll explain how they differ, when to use each, and how to decide which is right for your next investment or development.

What Is a Bridging Loan?

A bridging loan is a short-term property loan (typically 3–24 months) designed to “bridge the gap” between buying a property and securing longer term funding or selling it.

Bridging is commonly used for auction purchases, refurbishment projects, temporary refinance, or rescue funding to repay an existing lender.

Key features include: loans from £50,000 – £25 million+, up to 80% LTV, rates from 0.55% per month, and completions in days rather than weeks.

What Is Development Finance?

Development finance funds the construction or heavy refurbishment of property projects. It’s designed for experienced developers or SPVs and covers land purchase, build costs, and professional fees.

Typical uses include ground-up developments, conversions, or mixed use schemes. Loans can range from £250,000 – £50 million+, with up to 75% GDV and staged drawdowns as the work progresses.

Bridging vs Development Finance: Side-by-Side Comparison:

Feature:             Bridging Loan:                               Development Finance: 

Purpose: Short-term purchase or refinance    –     Construction or major refurbishment
Borrower Type: Investors, companies, developers     –    Developers, SPVs
Term: 3–24 months                                            6–36 months
LTV / GDV:            Up to 80% LTV                                         Up to 75% GDV
Funds Released:  Lump sum                                               Staged drawdowns
Speed:                   Very fast                                                  Slower due to QS and monitoring
Use Case:              Purchase, refinance, auction, exit          Build, convert, develop
Exit:                        Sale or refinance                                     Sale or refinance after build

 

Which One Suits Your Project?

Use a bridging loan for speed and simplicity, or development finance for construction and build-stage funding. If you’re buying at auction or refinancing a completed project, a bridge is ideal. For new builds or conversions, development finance is best.

Example: From Bridge to Development

A developer secures a commercial building at auction using a bridging loan for speed. After planning approval, they switch to development finance to fund the conversion into apartments. Once the works are complete, they use exit finance or a buy to let mortgage to refinance long term.

Tips for Choosing the Right Product:

1. Start with your end goal sale, refinance, or hold.
2. Match loan type to project phase.
3. Have a clear exit strategy.
4. Work with a broker who understands both markets.
5. Plan your timeline realistically to avoid unnecessary costs.

Important Notice:

We provide unregulated property finance for investors, companies, and developers. Our services are not authorised or regulated by the Financial Conduct Authority (FCA) and not available for owner-occupied residential properties.