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Commercial development finance funds the construction of non-residential properties and mixed-use schemes where the primary end use is commercial. This includes offices, retail units, industrial and warehouse buildings, care homes and healthcare facilities, hotels and serviced apartments, and mixed-use developments combining residential and commercial floor space.
The funding structure mirrors residential development finance, with staged drawdowns and rolled-up interest, but lender assessment is driven primarily by projected rental income and investment yield rather than comparable sales evidence.
Commercial development is more lender-selective than residential. Not all development finance lenders operate in this space, and those that do tend to focus on specific asset classes where they have underwriting confidence. At Square Gain Capital, we have relationships with the specialist lenders who are most active in commercial development and can identify the right funder for your project type, location, and scheme size.
We arrange commercial development finance for offices and business parks, retail units and shopping parades, industrial units and logistics facilities, care homes and extra-care residential schemes, hotels and aparthotels, and mixed-use schemes combining ground-floor commercial with upper-floor residential. Each asset class has its own lender market and underwriting approach.
Commercial development lenders underwrite on the investment value of the completed asset rather than on comparable sales. The investment value is calculated by capitalising the projected net rental income at the appropriate yield for that asset class and location.
Lenders instruct specialist commercial valuers to assess the estimated rental value of the completed scheme. The ERV is then divided by an investment yield appropriate for the asset class, location, and likely tenant covenant to produce the investment value, which becomes the GDV equivalent for a commercial scheme. In 2026, office yields in central London range from 5 to 7 percent; industrial and logistics yields range from 5 to 6.5 percent; care home yields from 6 to 8 percent depending on operational status.
A pre-let agreement with a named tenant, or a forward sale contract with an institutional investor, significantly strengthens a commercial development application. Lenders view pre-let income as a credible proxy for the ERV assumption and as evidence of market demand for the scheme. Pre-lets are not a requirement for all commercial development facilities, but they expand the range of available lenders and can improve the pricing offered.
Commercial development lenders place greater emphasis on sector-specific experience than residential lenders. A developer with a strong track record in residential new build may find that commercial development lenders require a commercial track record or a joint venture with an experienced commercial developer before they will provide development funding.
| Land Type | Typical LTV | Typical Rate (p.m.) | Typical Term | Exit Route |
|---|---|---|---|---|
| Land with full PP | 60% – 70% | 0.75% – 1.00% | 12 – 24 months | Dev finance or sale |
| Land with outline PP | 55% – 65% | 0.85% – 1.10% | 12 – 24 months | Reserved matters + dev finance |
| Land without PP (good planning case) | 50% – 60% | 1.00% – 1.30% | 12 – 24 months | Sale with PP or dev finance |
| Agricultural land (resi potential) | 50% – 55% | 1.10% – 1.40% | 12 – 18 months | Sale with PP |
Land finance is assessed on the security value of the land and the credibility of the exit strategy. Unlike development finance, there is no build to add value — the exit depends on either achieving planning permission and selling, or proceeding to build.
The residual land value calculation works backwards from the anticipated GDV of the completed scheme, deducting total development costs including build, fees, finance, developer profit, and a risk margin. The resulting figure is what a developer should rationally pay for the land. Lenders use this calculation to sense-check the land price and to assess whether the exit route via development is genuinely viable.
For land without planning permission, the lender’s primary concern is whether planning is achievable within the facility term. A planning consultant’s report supporting the planning case, evidence of the local authority’s planning policy and recent decisions on similar sites, and the developer’s experience in obtaining planning permission in similar contexts all strengthen the application.
We review the site, the planning position, and the proposed exit strategy. For land without planning permission, we also review the planning case and advise on whether the proposed planning route is consistent with what lenders in this space require.
Land finance lenders are a specialist sub-set of the bridging and development finance market. We identify the most appropriate lenders for the specific planning status, land type, and loan size, and approach them with a structured information pack.
The lender instructs an independent RICS valuer who specialises in development land. The valuation assesses both the current open market value and, where relevant, the planning potential value. For land without planning permission, the valuer also provides a view on the site's planning prospects.
Credit decisions for land finance typically take one to two weeks for straightforward sites with planning permission, and two to four weeks for more complex speculative land applications. Legal completion follows the credit decision.
During the facility term, the developer progresses the planning application. We monitor the planning timetable and advise on facility extensions or refinancing options if the planning process takes longer than anticipated. On consent being granted, we arrange the development finance facility to fund the build or assist with a sale to a housebuilder.
Land acquisitions and planning processes have their own specific challenges. Here are some of the situations our advisers help land buyers and developers work through.
Land with planning permission acquired at auction requires the same rapid completion as any other auction purchase. We arrange land finance before the auction so you know your borrowing capacity and can bid with confidence. Completion within the standard 28-day auction period is achievable for sites with clean planning consent and a straightforward security position.
Agricultural land with development potential is a long-term play, and the planning process can take several years. If you need to release capital from the land before planning is achieved, the options are narrower and the LTV lower than for land with existing planning consent. We identify lenders who are comfortable with speculative agricultural land and who understand the relevant local planning context.
Planning delays are common, and land finance lenders expect extensions to be requested on some cases. We engage with the lender as soon as a planning delay becomes apparent and negotiate the extension before the facility expires. Where the existing lender cannot accommodate an extension on reasonable terms, we identify alternative lenders who can refinance the land facility for the additional time needed.
Landowners can raise capital against existing land to fund planning costs, professional fees, and holding costs while a planning application is progressed. The facility is secured against the land and repaid when planning is achieved and the site is sold or when development finance is arranged to fund the build. The land does not need to be unencumbered to qualify, though existing charges affect the available LTV.
Speak to an adviser to discuss your circumstances and find out how we can help.
Clear,honest answers to the questions we hear most from clients and introducers.
Yes, though the lender panel is narrower and the LTV lower. Lenders in this space assess the planning potential of the site, the strength of the planning case, and the developer’s experience in navigating planning applications. A strong planning consultant’s report supporting the planning case is an important part of the application for land without existing planning consent.
Land finance is a form of bridging loan secured against land rather than a building. Standard bridging lenders typically require a building as security. Land finance lenders specialise in land as a security type and understand how to assess planning potential and residual land value. Some lenders offer both products; others are land-specialist only.
Yes. The facility is typically structured to cover both the land acquisition and an agreed budget for planning costs, professional fees, and holding costs. The planning cost element may be held in a reserve account and released as planning costs are incurred, rather than advanced in full at the outset.
Most land finance lenders advance up to 65 to 70 percent of the open market value of land with full planning permission. Some specialist lenders go to 75 percent for very strong planning consents in high-demand locations. Mezzanine finance can increase effective leverage in some cases, though the blended rate increases.
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