The dividing line is straightforward once you see it: a bridge is a single advance against what a property is worth today. Development finance is staged funding released against work being done.
If the value you are creating comes from buying well, waiting, or doing cosmetic work, a bridge fits. If the value comes from construction, you need a development facility. Getting this wrong is expensive in both directions.
How each one works
Bridging. The lender advances a single lump sum against the current value of the property. You draw it at completion and repay it at the end of the term. Nobody inspects your progress, because there is nothing to inspect.
Development finance. The lender advances an initial tranche against the site or building, then releases further tranches as the build progresses. A monitoring surveyor inspects before each drawdown, confirms the works claimed have been done, and reports on whether the scheme is on budget and on programme. Interest is usually rolled up and repaid on exit.
The second structure exists because construction risk is different from property risk. A half-built house is worth less than the site it stands on plus the money spent on it. Staged drawdowns keep the lender's exposure aligned with what actually exists on the ground.
Side by side
| | Bridging | Development finance | |---|---|---| | Money released | One advance | Initial tranche plus staged drawdowns | | Sized against | Current value | Site value plus build costs, capped by GDV | | Monitoring | None | Monitoring surveyor before each drawdown | | Typical term | 1 to 24 months | 12 to 24 months, matched to the programme | | Cost | Lower rate, simpler fee structure | Higher overall, plus monitoring costs | | Experience | Matters, not decisive | Matters a great deal | | Best for | Purchases, light works, refinances | Ground-up, conversions, heavy refurbishment |
When a bridge is right
Buying quickly. Auction purchases, chain breaks, below-market opportunities with a deadline. No construction involved, so no staged funding needed.
Light refurbishment. Kitchens, bathrooms, rewiring, decorating, new windows. Cosmetic work that does not need planning permission or building regulations. You fund the works from your own resources, or the lender releases a modest works tranche.
Refinancing. Replacing an expiring facility, or releasing equity from a property you already own.
Development exit. Refinancing a finished scheme onto cheaper funding while the units sell. The construction risk has gone, so it is priced as a bridge, not as development lending. This is often the cheapest facility in a developer's whole cycle.
Land without planning. Lenders will generally not provide a development facility until consent is granted. A bridge at a low loan to value buys the site; the development loan refinances it once consent is in.
When you need development finance
Ground-up construction. Any new building. There is no existing value to lend against beyond the site, so the money has to follow the build.
Conversions creating new units. Commercial to residential, a house split into flats, an office block converted under permitted development. The value is created by the change and the works.
Heavy refurbishment. Structural alterations, extensions, underpinning, roof replacement, taking a building back to shell. Anything needing building regulations approval or planning permission.
Anything with a build programme longer than a few months. Once there is a programme with stages, a contractor and a quantity surveyor, you are in development territory whether the facility is labelled that way or not.
The grey area in the middle
Most borrowers who get this wrong are somewhere in the middle: a substantial refurbishment that is not quite a development.
Three questions usually resolve it.
Does the work need planning permission or building regulations approval? If yes, it is probably a development case.
Is the number of units changing? Turning one dwelling into three is development, even if no new building goes up.
Can you fund the works from your own resources? If yes, a bridge with a works tranche may be simpler and cheaper. If the works budget is larger than your available cash, you need staged drawdowns — which means a development facility.
There is also a middle product: heavy refurbishment finance, which is staged like development finance but structured around an existing building rather than a new one. We cover it under heavy refurbishment.
Cost: which is more expensive?
On the headline rate, bridging is usually cheaper. On the total cost of a project, it is not that simple.
Development finance carries costs a bridge does not: monitoring surveyor fees for every drawdown, a more expensive valuation, and usually a higher arrangement fee. Against that, you only pay interest on money actually drawn. On a twelve-month build where funds release gradually, the average balance may be half the facility size — so the interest bill can be lower than a bridge for the same headline facility.
A bridge charges interest on the full amount from day one, whether you have spent it or not. On a large works budget that is genuinely wasteful.
The right comparison is total cost over the whole project, including monitoring fees, against the interest you would pay on a fully-drawn bridge for the same period. Our bridging calculator gives you the bridging side of that comparison with every fee included.
How lenders size each facility
Bridging is sized against current value, subject to a maximum gross loan to value — typically up to 75%, with fees and rolled-up interest counted inside that figure.
Development finance is sized against three constraints at once:
- a percentage of the site or current value, often 60% to 70%
- a percentage of build costs, frequently up to 100%, released in arrears
- a cap on total debt as a percentage of gross development value, usually 65% to 70%
The GDV cap is normally the binding one. It is also the figure most often argued over, because it depends on comparable evidence for units that do not exist yet. Optimistic comparables get corrected by the valuer, and the facility shrinks.
Experience matters more on development
On a bridge, experience affects pricing. On a development facility it can determine whether you get funded at all.
A first-time developer can get a small scheme funded — a pair of houses, a modest conversion — particularly with a strong contractor, a quantity surveyor and a credible professional team. Expect lower leverage and higher pricing, and expect to put in more cash.
By the third or fourth completed scheme, with photographs, final accounts and outcomes to show, the terms available change materially. Keep records of every project. Your development CV is a financing asset.
A common sequence
Many schemes use both products, in order:
- Bridge to buy the site before planning is granted, at a low loan to value.
- Development facility refinances the bridge once consent is in place and funds the build.
- Development exit bridge at practical completion, replacing the development loan with cheaper funding while units sell — often releasing profit for the next site.
Each product does the job it is designed for. Trying to make one of them do all three is where projects run into trouble.
Which do you need?
If it is a purchase, a light refurbishment or a refinance, it is a bridge.
If it is construction, a conversion or structural work with a programme, it is development finance.
If it is somewhere in between, the answer depends on the works, the consents and your cash position — which is a ten-minute conversation, not a guess.
Send us the outline and we will tell you which product fits and roughly what it costs. There is no charge for the review, and if a bridge is cheaper and simpler than a development facility we will say so.