How to Raise Money for Your Development: A Guide for Small-Scale Property Developers

August 4, 2025

Raising money for a property development project can often feel like a daunting task, especially when you’re just starting out. Many aspiring developers believe that a large amount of personal capital is essential to get going. While it’s true that funding is necessary, it doesn’t have to be all your own money. With the right approach, you can access a blend of commercial and private finance to secure the capital required to launch and complete your development. This comprehensive guide will walk you through the process of raising money for your property development project, focusing on how to combine different sources of finance effectively.

This article will provide you with actionable insights into the types of finance available, how lenders view your project, and the best strategies for presenting yourself and your deal. Whether you’re a property developer, or investor starting out, this guide will help you understand the fundamentals of development finance and how to secure the money you need to succeed.

Table of Contents

Understanding the Need for Money in Property Development
Raising Commercial Finance for Your Development Project
Understanding Interest and Repayment Terms
Private Finance: Unlocking Additional Funding
Blending Commercial and Private Finance
Critical Success Factors for Raising Development Money
Common Questions About Raising Money for Property Development
Conclusion: You Can Secure the Money You Need for Property Development

Understanding Interest and Repayment Terms

One of the attractive features of development finance is that interest payments are usually rolled up and paid at the end of the project rather than monthly. This means you do not have to make regular interest payments during construction, easing cash flow pressures.

When the development is completed and units are sold, the loan and the accumulated interest are repaid in full. This structure allows you to focus entirely on completing the project without worrying about monthly repayments.

Raising Commercial Finance for Your Development Project

Commercial finance is often the backbone of your development funding. Specialist lenders who focus on property development projects are willing to provide substantial funding, but the key to securing their support lies in the strength of your deal. Unlike traditional buy-to-let mortgages, where lenders scrutinise your personal affordability, commercial development lenders prioritise the viability of the project itself.

What Can You Borrow?

For projects that fall under permitted development rights, such as converting a commercial property into residential flats, commercial lenders can offer:

Up to 70% of the purchase price: This means if the property costs £200,000, you might be able to borrow £140,000 towards the purchase.
100% of the development costs: This is a significant advantage, as it covers all expenses related to building and refurbishment, including materials, labour, and professional fees.

Development costs encompass everything from kitchens, bathrooms, plastering, plumbing, electrics, windows, doors, walls, carpets, and more to the labour involved - plasterers, plumbers, electricians, kitchen fitters, and other trades. It also includes professional fees such as architects, structural engineers, cost consultants, project managers, and planning consultants.

The ability to borrow 100% of development costs greatly reduces the upfront capital you need to bring to the table and makes projects more accessible for developers starting out.

Why Lenders Focus on the Deal, Not You

When applying for development finance, it’s essential to understand that lenders prioritise the deal and the team behind it, rather than the individual developer’s personal financial situation. This contrasts sharply with buy-to-let or residential mortgage applications, where lenders assess your income, employment status, credit history, and monthly affordability.

For buy-to-let loans, lenders demand extensive documentation:

Proof of income, such as payslips and bank statements
Credit card statements and details of existing loans
Monthly expenditure breakdowns
Employment history and job security

This is because the lender needs to ensure you can cover mortgage payments during void periods or unexpected expenses. However, this is not the case with development finance.

The Deal Comes First

With development finance, the lender’s primary concern is whether the project itself stacks up financially. Is the deal viable? Will it generate a sufficient profit margin? The lender’s focus is on the numbers, the market, and the certainty of the project.

For example, if you are converting an old commercial building into residential flats using permitted development rights, the lender will want to see:

Clear plans showing the scope of work
Evidence that permitted development rights apply
Strong location and market demand
Projected profit margins of around 20% or more

If these criteria are met, lenders become much more comfortable providing funding because the risk is tied to the project, not your personal financial standing.

The Importance of Your Team

Once the deal is proven to be viable, the lender wants to know about the team executing the project. This includes:

Architect: A reputable architect with experience in similar projects adds credibility.
Structural Engineer: A qualified engineer who understands the building’s requirements and has worked on similar developments.
Cost Consultant: Someone who can accurately estimate and control development costs.
Project Manager: A professional who can oversee the project and ensure it stays on schedule and budget.
Contractors: Reliable and financially stable builders with a track record of similar projects.

Lenders want to see a well-rounded, competent team because the success of the project depends on their expertise and management. A strong team reassures lenders that the development will be completed efficiently and profitably.

Who Are the Lenders?

Development funding is usually arranged through specialist brokers rather than high street banks. These brokers have relationships with a network of lenders who specialise in short-term development finance. The typical lending period ranges from one to three years, perfect for small-scale developments.

These lenders are not the usual mortgage providers like Halifax, Nationwide, or Shawbrook. Instead, they focus solely on property development projects and understand the risks and rewards involved. They are comfortable with rolling up interest payments and repaying the loan once the development is sold.

What About You?

While lenders focus on the deal and the team, they will still want to understand your financial standing in terms of net assets rather than monthly affordability. They want to know your net asset position, how much you are worth after liabilities are deducted. This can include equity in your home, business assets, or other investments.

Interestingly, lenders are often not concerned if you have left a traditional job to focus full-time on property development. In fact, this can be seen as a positive, as it shows dedication to the project.

Understanding Interest and Repayment Terms

Private Finance: Unlocking Additional Funding

While commercial finance can cover up to 70% of the purchase price and 100% of the development costs, this usually leaves around 30% to be funded by private money or your own capital. Private finance is a vital piece of the puzzle and can come from a variety of sources, including friends, family, business associates, or external investors.

Why Private Investors Are Interested

Many people have money sitting in the bank earning low interest rates, typically around 4% or 5%. When you offer them a property development investment opportunity with returns of 8%, 9%, or even 10%, it becomes an attractive proposition.

Private investors are often looking for safe, tangible investments where their capital is secured by bricks and mortar. A property development project offers exactly that: a physical asset they can see and understand, unlike stocks or shares which can be more volatile and intangible.

Who Are These Private Investors?

Private investors can be anyone in your social or professional network, including:

Aunties, uncles, cousins
Old work colleagues
Friends or acquaintances with savings
Small business owners with surplus cash

Many people have savings of £40,000 to £50,000 sitting idle in low-interest accounts. Offering them a chance to double their returns with a secure property investment can be mutually beneficial.

How to Approach Private Investors

It’s important to approach private investors with professionalism and care. Here are some key tips:

Present Yourself Well: Dress appropriately and demonstrate confidence and knowledge about property development. You don’t need to be in a suit, but smart casual attire like a nice shirt and trousers goes a long way.
Communicate Clearly: Explain the investment opportunity, the expected returns, the security of the investment, and the timeframe.
Don’t Ask Directly for Money: Instead of outright asking for funds, share what you’re doing and the returns you’re achieving. Let potential investors come to you with interest.
Build Trust: People invest in people. Show your expertise, your team’s credentials, and your track record or plans clearly.
Understand Legal Restrictions: Be aware of Financial Conduct Authority (FCA) regulations, especially around advertising investments and dealing with sophisticated vs non-sophisticated investors.

By positioning yourself as a credible property developer offering attractive returns, private investors will be more inclined to trust you and want to participate.

Blending Commercial and Private Finance

The ideal funding model for small-scale property development involves blending commercial finance with private investment. Here’s how the typical structure might look:

Commercial Finance: 70% of the purchase price and 100% of the development costs.
Private Finance: Part of the remaining 30% needed for the purchase price, often supplemented by your own capital.
Your Own Capital: A portion of your own money to demonstrate commitment and cover any shortfalls.

This combination minimises your personal financial exposure while maximising the amount of money you can deploy into your projects. It also allows you to scale up developments more quickly by leveraging other people’s money effectively.

Critical Success Factors for Raising Development Money

To successfully raise money for your development, keep the following factors in mind:

Focus on the Deal: Ensure the project stacks up financially with at least a 20% profit margin. Lenders and investors want to see solid returns and low risk.
Build a Strong Team: Assemble a team of professionals with relevant experience and credibility, including architects, engineers, cost consultants, project managers, and contractors.
Present Yourself Professionally: Whether dealing with brokers, lenders, or private investors, your presentation matters. Be knowledgeable, confident, and well-prepared.
Use Specialist Brokers: Work with development finance brokers who understand the market and can position your deal effectively with lenders.
Understand Your Financial Position: Know your net assets and be ready to demonstrate your financial standing to lenders.
Communicate Clearly with Private Investors: Share the opportunity without directly asking for money and articulate the benefits and security of the investment.

Conclusion: You Can Secure the Money You Need for Property Development

Raising money for your property development project is entirely achievable when you understand the landscape of development finance. It’s not about having all the cash yourself but knowing how to blend commercial finance and private investment effectively. By focusing on creating a solid deal, building a competent team, and presenting yourself professionally, you can access the funding necessary to start and complete your projects.

Remember, specialist lenders are looking for viable deals with strong profit potential, and private investors are attracted to the opportunity for higher returns secured by tangible assets. By combining these sources, you can leverage other people’s money, reduce your personal financial exposure, and grow your property development portfolio.

With the right knowledge, preparation, and mindset, you can turn your property development ambitions into reality and achieve six-figure profits on your projects. So, don’t be discouraged by the notion that you need a fortune of your own, there’s plenty of money out there, and with the right approach, you can raise all the money you’ll ever need.

Now is the time to take action, build your team, refine your deal, and start conversations with both commercial brokers and private investors. Your property development journey starts with a single step, make sure it’s the right one.

Frequently Asked Questions

You do need money, but it doesn’t all have to be yours. Commercial lenders can provide up to 70% of the purchase price and 100% of the development costs. The rest can come from private investors or your own capital, meaning you can start with much less personal money than you might expect.

Permitted Development Rights allow certain types of property conversions without needing full planning permission. Projects under these rights are seen as lower risk by lenders because of the certainty they offer, making it easier to secure funding.

Lenders focus primarily on the deal and the team rather than your personal affordability. They will want to see a viable project with strong profit potential and a credible team. They also want to understand your net asset position rather than your monthly income.

Yes, private investors are a valuable source of finance. Many people have money in savings accounts earning low interest and are attracted to property development for higher returns. It’s important to approach these investors professionally and comply with relevant financial regulations.

All investments carry risk, but by structuring your deal well, having a strong team, and ensuring the project is viable, you can minimise risk. Transparency with investors and clear communication about the risks and returns is essential.