Development Finance

What makes a development finance application lender-ready?

Lenders normally assess land control and title, planning and permits, an independently supported valuation, the cost-to-complete budget, contractor procurement, sponsor track record and the proposed sales or refinance exit. The required evidence and leverage thresholds depend on the lender and project.

Loan-to-cost (LTC) and loan-to-value (LTV) measure different risks. The finance structure should also reflect staged drawdowns, interest during construction, contingencies and a realistic programme. KSCG helps sponsors prepare a coherent capital structure and identify lenders with a suitable mandate.

Development finance underwriting guide

Financing development from acquisition to completion

KSCG advises developers, investors and sponsors on the structuring and placement of development finance across a wide range of real estate projects.

Development financing can include land acquisition, construction costs, professional fees, interest reserves and other project-related expenditure.

The optimal financing structure depends on the asset, planning status, sponsor experience, development programme, projected values and exit strategy.

Capital Structure

Senior debt, structured capital and equity

Depending on the transaction, development finance may consist of a single senior facility or a broader capital stack.

KSCG can assess senior debt, stretch senior, subordinated debt, preferred equity and joint venture capital where required to achieve an appropriate funding structure.

Our Approach

From financing strategy to closing

KSCG works with clients throughout the financing process, starting with the assessment of the development business plan and proposed capital structure.

We identify suitable lenders and capital providers, prepare the financing approach, coordinate lender engagement, compare proposals and support negotiations through documentation and closing.

Markets

European development finance

Lender Readiness

Development finance: ten questions to ask before approaching lenders

For professional development finance mandates from €5 million, KSCG helps sponsors assess lender suitability, financing structure, execution risks and the route to repayment. Requirements vary by lender, project and jurisdiction; indicative assessments are not binding commitments.

Is my development project ready for financing?

KSCG first checks the transaction, sponsor and contractor track records, ownership, permits, construction budget, valuation, equity, security and credible exit. A project can be prepared before every condition is satisfied, but a lender's appetite, indicative terms and an executable commitment are different stages. We identify critical gaps before approaching suitable lenders.

How will the development loan be repaid if the exit is delayed?

The primary exit may be unit sales, phased disposals or refinancing of retained assets. KSCG tests net proceeds, sales pace, release prices, interest, maturity and refinancing capacity, including a downside with delays, lower values and higher rates. An alternative exit must be credible rather than assumed.

How much equity is needed, including potential construction cost overruns?

There is no universal percentage. Lenders distinguish evidenced capital already invested from cash still available and may require sponsor support for cost overruns. KSCG reconciles sources and uses, remaining costs, contingency and liquidity, including who funds any shortfall beyond the facility. A budget contingency does not itself prove the sponsor can cover overruns.

Can we apply before the final building permit is issued?

Yes, KSCG can prepare the application and seek an indicative or conditional assessment while issuance is pending. Where a lender requires the definitive permit, a binding commitment or utilisation remains subject to that permit and all other applicable conditions. The expected issuance date, any relevant challenge period and the impact of delay must be assessed; a pending permit is not a granted permit.

Why do the sponsor's and main contractor's track records matter?

Lenders assess the sponsor's comparable completed developments, financial capacity and actual role, separately from the contractor's delivered projects, capacity and financial strength. In Spain, independent technical monitoring is commonly required and does not replace a capable contractor. KSCG identifies execution gaps before lender outreach.

Does a fixed-price construction contract reduce financing risk?

Contractual price certainty matters. Even a stated fixed price can include exclusions, provisional sums, indexation or variation clauses. Where costs may change, lenders can assess higher potential overruns, contingency and sponsor liquidity requirements, or more conservative drawdown terms. KSCG reviews the cost plan, contract scope and responsibility for overruns.

Which valuation is needed in Spain, and who should order it?

An indicative appraisal, residual land assessment, as-is value, projected completed value and formal tasación serve different purposes. A preliminary valuation is useful for structuring an application. Before commissioning a full report, ask KSCG to check the intended lender's valuation basis and approved valuer: some lenders appoint their own surveyor, and an unsuitable report can lead to duplicate fees.

Why do Spanish lenders use independent construction monitoring?

A lender-appointed or lender-approved external technical adviser may check the budget, works completed, cost to complete and drawdown evidence. Appointment, scope and fees vary by lender and must be budgeted where applicable. The monitor's role does not substitute for the contractor's proven ability to deliver.

How do LTC, LTV and LTGDV affect the loan amount?

LTC compares debt with lender-defined eligible development costs, LTV with the relevant current value and LTGDV with projected completed value. Different debt definitions, fees, rolled-up interest and valuation assumptions can change the result. KSCG reconciles these measures and compares lender proposals on a consistent basis.

What information does KSCG need to approach suitable lenders?

An initial package normally includes sponsor and ownership details, contractor track record, project summary, acquisition and title documents, permits, valuation evidence, cost-to-complete budget, fixed or variable construction terms, sources and uses, proof of equity, existing debt, security and a tested repayment plan. For Spanish development-finance mandates, KSCG requires the development project to be held through a Spanish S.L. project company. This is a KSCG mandate requirement, not a statement that Spanish law requires every development to use an S.L. Where needed, we can introduce suitable Spanish lawyers and notaries for incorporation and legal advice. Read the development finance underwriting guide for more detailed questions.

For further detail on construction procurement, started works, financing deadlines, capital stacks and security, see our development finance underwriting guide.

Discuss a development financing

Speak with KSCG about the financing structure, leverage, lender appetite and execution of your development project.