Development

“My build costs have overrun and the facility will not stretch”

A cost overrun mid-scheme is resolved by additional funding, a reduced specification, or further cash from the developer — and which of those is available depends almost entirely on how early the problem is raised. A part-built scheme is worth less than the site plus the money spent on it, so nobody benefits from it stalling.

An illustrative situation, not a client case study. It describes the kind of enquiry this market sees. Any figures are examples, not a quotation, and no credit check or lender decision is involved in reading this.

Sound familiar?

The quantity surveyor’s valuations are running ahead of the original cost plan
The contractor has issued variations you had not budgeted for
You can see that the remaining facility will not reach practical completion
You have been funding stages from your own cash to keep going

The situation

Overruns are normal. Ground conditions, material prices, a contractor going under, a variation nobody costed — most schemes meet at least one of these. The question is never whether something goes wrong, but whether there was contingency and honesty about it.

What makes overruns dangerous is the reporting gap. Developers often keep going, funding stages personally, hoping to absorb it — and only raise it when the cash is gone and the building is half finished.

Why the usual lenders say no

No mainstream lender will fund a partially completed building.
A new development lender taking over mid-scheme is a complex refinance, priced accordingly.
A stalled site with a part-built structure is difficult security with a limited buyer pool.

What usually works

Talking to the existing lender first

Most development lenders would far rather increase a facility than take back a half-finished building. Bring the QS’s revised cost plan and a clear path to completion.

A refinance onto a larger facility

Where the existing lender will not extend, another lender may refinance the whole scheme at a higher figure, particularly if the gross development value still supports it.

Value engineering with the QS

Specification changes that do not materially affect the end value can recover a surprising amount, and lenders respond well to a developer who has already done this work.

Mezzanine or additional equity

More expensive than senior debt, but if the scheme still shows a profit at completion it can be cheaper than the alternative of stalling.

Roughly how the numbers look

Illustrative figures for this situation
Contingency lenders expect at the outset	5% to 10% of build costs
Constraint on any increase	The loan to gross development value cap
Cost of stalling	Interest continues, the asset does not improve
Best time to raise it	As soon as the cost plan moves, not when the money runs out

If the gross development value has also moved since the original appraisal, the headroom for an increase may be smaller than you expect. These are examples to show the shape of a deal, not a quotation. Work out your own figures in the bridging calculator.

What we would need from you

The original appraisal and the revised cost plan
The quantity surveyor’s latest valuation and report
The contractor’s position, including any variations and their status
A realistic revised programme to practical completion
Current facility letter and drawdown history
Updated comparable evidence for the gross development value

Things that catch people out

Do not quietly fund stages from personal cash without telling anyone. It hides the problem until it is unfixable.
If the contractor is in financial difficulty, that is a separate and urgent issue.
Any increase is constrained by the loan to GDV cap, not by what you need.

Questions we get asked

Will my lender increase the facility?

Often, if the scheme still stacks up and you come with a quantity surveyor’s revised cost plan and a credible route to completion. Lenders would rather fund a finish than take back a part-built site.

Can I move to a different lender mid-build?

It is possible but complex, and priced for the complexity. It is usually a last resort after the existing lender has been approached properly.

What if the scheme no longer shows a profit?

Then that needs establishing honestly and early, because it changes every decision that follows. Finishing and selling at a small loss is normally far better than stalling with interest still accruing.

The product that usually fits

Development finance

Every case is different. A specialist will confirm what actually fits yours.

Rather talk now?

020 4525 4876

9:00am – 5:30pm, Monday to Friday

Keep reading

Related situations and guides

“My scheme is finished but the units are not selling and the loan is due”

Practical completion is done, some units are sold, and the development facility is approaching term.

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“This is my first development and lenders keep asking about my track record”

You have the site and the planning, but no completed schemes to point at.

Read the scenario

Bridging vs development finance: which do you need?

The real dividing line between a bridge and a development facility, how each is drawn down and priced, and which one your scheme needs.

Read the guide

How much does a bridging loan cost?

Every cost in a bridging loan, from the monthly rate to the fees that get added to the balance, with a worked example you can check in our calculator.