Development Finance vs Bridging Loans: Which Do You Need?

Property investors and developers often ask whether they need development finance or a bridging loan. Both are short-term, property-secured and fast-moving - but they're built for different jobs. Choosing the wrong one can cost you time and money.

What is bridging finance?

A bridging loan is short-term funding secured against property, used to move quickly or to fund light works. It's typically drawn as a lump sum and repaid from a sale or a refinance. Bridging suits purchases at pace, chain breaks, light refurbishments and situations where a property isn't yet mortgageable.

What is development finance?

Development finance funds larger building and construction projects - ground-up new builds, major conversions and heavy refurbishments. Rather than a single lump sum, it's usually released in stages as the project progresses, with funds drawn down against completed work and verified by the lender. This keeps borrowing costs down because you only pay interest on what's drawn.

How to tell which you need

• Choose bridging if you need to buy or refinance quickly, or carry out light, cosmetic works, and you have a clear near-term exit.
• Choose development finance if you're building, converting or heavily refurbishing, and need funding released in stages against a construction programme.

Some projects use both in sequence - a bridge to secure the site quickly, then development finance to fund the build - before exiting onto a term mortgage or sale.

What lenders look at

• Your experience and track record as a developer.
• The project's costs, programme and end value (GDV).
• Planning status and the credibility of your exit.
• Your contribution to the project.

How we help

Structuring property finance well - and sequencing bridging and development facilities correctly - is where an experienced specialist earns their keep. At Sadi's Commercial Finance we arrange both bridging and development finance, and we structure funding around the reality of your scheme. As our recent Stratford revolving credit facility shows, complex property deals are exactly where the right structure matters most.

Planning a property project? Compare our development finance and bridging loans services, or speak to a specialist.