A bridging loan pays out mostly at completion, is sized on the property's current value and suits purchases, light works and quick turnarounds. Development finance releases money in stages as the build progresses. It is sized on build costs and the finished value and suits ground-up builds and large conversions. The scale of the works usually decides.
8 min read · Updated October 2026 · Reviewed by Ashley Thomas, Director
Talk about your project
How much do you need to borrow?
About 90 seconds in all. No credit check until you choose a lender. Capito is a broker, not a lender.
The main difference is how and when the money arrives. A bridge lends against what the property is worth now, while development finance lends against what you're going to build and pays out as you build it.
A bridge typically pays out in one go and you repay it in one go, whereas development finance is drawn down over the life of the project.
Most of a bridging loan is released at completion, sized on the current value of the property. Capito's panel lends up to 80% gross LTV on bridging, mostly on residential property, and up to 75% for purely commercial property. Interest is usually rolled up (added to the balance and paid at the end) or retained (deducted upfront for an agreed period). Some lenders add a works element released in arrears, but the core loan is still a lump sum on day one.
Development finance normally pays for the land or building at completion and then releases the build budget in tranches. Before each tranche, a monitoring surveyor (an independent surveyor appointed for the lender) visits site, checks the work completed against the cost plan and signs off the drawdown. You pay interest only on the money you've drawn, though some lenders charge interest on the full facility from the start. The trade-off is more paperwork and a slower start.
Bridging lenders look mainly at loan to value, while development lenders test loan to cost and loan to gross development value and lend the lower of the two.
LTV is the loan as a percentage of the property's current market value. On a bridge it decides how much you can borrow, and it matters again at the end, because exits mostly fail when the LTV is too high to refinance (see bridging exit).
Loan to gross development value (LTGDV) is the total facility as a percentage of what the finished scheme should be worth. Loan to cost (LTC) is the facility as a percentage of the total project cost, meaning land plus build plus fees. Development finance is commonly quoted in the market at 55–75% LTGDV and 70–80% LTC, with up to 100% of build costs on some deals. Land with planning is often quoted at around 50% of value.
Your equity is the gap between total project cost and the facility. Development lenders usually want your money in first, before their build tranches start.
If you answer yes to most of these, you're probably looking at development finance rather than a bridge.
Take an office building bought for £1,000,000, to be converted into ten flats with a build cost of £800,000 and an estimated finished value of £2,400,000 (illustration only, not lender terms).
The bridge leaves you funding most of the build yourself, which is why a project of this size usually goes to a development lender. Here LTC, not LTGDV, is the limit.
The products overlap on schemes that are more than a refurbishment but less than a new build, and lenders draw the line in different places.
Some bridging lenders offer heavy refurbishment bridges with staged works funding, which look a lot like light development finance. What tends to decide it is whether there's structural work, whether planning is needed and how big the build budget is next to the purchase price. Our guide to light vs heavy refurbishment covers this in detail.
Converting offices to flats under permitted development rights avoids a full planning application, but you still need prior approval and building regulations sign-off. Smaller, simpler conversions can sometimes be done on a heavy refurbishment bridge, while larger schemes with substantial works usually go to development finance.
A bridge can buy land quickly, with or without planning, as long as the lender is comfortable with the exit. Development finance generally needs planning in place before it will fund the build, so many developers buy the plot on a bridge first.
Yes, and plenty of projects do. A common sequence is to bridge the site to complete quickly, get planning, refinance into development finance for the build, then move to development exit finance once the units are finished but not yet sold. Development exit loans typically lend up to 75–80% of the value of finished unsold units, which can clear the development facility and give you time to sell at the right price. Each step has its own fees, so the uplift needs to cover them.
If the senior development loan doesn't stretch far enough, mezzanine finance can sit behind it as a second charge and reduce the cash you put in, at a higher cost than the senior debt. Joint venture or equity partners take a share of the profit instead. Either needs the senior lender's consent.
The fee headings look similar for both, though amounts and structures differ:
See bridging loan costs for the bridging side. We don't quote interest rates, because they depend on the lender and the case.
A bridging lender focuses on the property and the exit: how you'll repay, by sale or refinance, and whether the numbers stand up. An automated valuation can be same day, and a standard one typically takes 2–5 days.
A development lender is lending against something that doesn't exist yet, so it wants much more:
First-time developers can often still borrow, usually at a lower loan to cost or with an experienced partner.
The case Ashley sees cross the line most often is a conversion to residential. It can look like a heavy refurbishment bridge at first, but once the works grow to structural changes or new units, some lenders will only treat it as development finance, so it's worth testing that before you commit.
For light works and some heavy refurbishment, yes. Ground-up builds and large conversions usually need development finance, because a bridge sized on current value can't fund the build.
It's a short-term loan for building or converting property, released in stages as a monitoring surveyor signs off the work and sized on project cost and finished value.
It can be either, depending on structural work, planning and the build budget against the purchase price.
Yes, it's a common route. Once planning is granted, the uplift in value can help you refinance into a development facility.
Not always. First-time developers can sometimes borrow at a lower loan to cost or with an experienced partner on board.
Usually by selling the finished units, refinancing onto a longer-term loan, or moving onto development exit finance while the units sell.
They act for the lender, reviewing the cost plan and visiting site before each drawdown to confirm the work is done.
Planning a purchase, refurbishment or build? Tell us the costs and end value, and a specialist will tell you whether it suits bridging or development finance.
Talk about my projectCapito is a Commercial Finance Broker, not a lender. Capito Finance Limited is not authorised or regulated by the Financial Conduct Authority and does not arrange regulated mortgages. If you or a family member live in the property, or will, the loan is likely to be regulated and we refer you to an authorised partner firm.
Finance is subject to the lender's assessment. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
About 90 seconds to tell us what you need. No credit check until you choose a lender.
Talk about my project