A property investor and experienced estate agent acquired a mixed-use commercial building with planning consent and a clear vision for increasing its value through residential development. Despite this being their first development project, they had already enhanced the property through significant refurbishment works and identified an opportunity to create three new residential units. Working closely with Elizabeth Powell of Willow Private Finance, a development finance facility was structured that provided both immediate capital and staged funding to support the build through to completion.

For many first-time developers, securing development finance for a commercial-to-residential conversion can be challenging, particularly where planning amendments are still progressing and there is limited direct development track record. This type of scenario is increasingly common as investors look to unlock value from existing commercial assets rather than acquiring land at today's elevated prices.

The client had purchased the property earlier in the year. The asset comprised two commercial units with residential development potential above and behind the existing premises. Since acquisition, substantial improvements including roof repairs, damp remediation and the creation of a new entrance had already increased the property's estimated value.

While planning permission had originally been granted for six flats, the client adopted a more conservative and commercially viable approach, electing to develop three units instead. Two flats would be positioned above the existing commercial premises, with a third unit created to the rear.

A revised planning application for the rear unit had recently been submitted with support from a planning consultant, and the client was confident approval would be granted shortly.

Why Traditional Funding Options Were Limited

Although the project fundamentals were strong, several factors reduced the number of lenders willing to support the transaction.

The borrower was entering their first development project, meaning there was no direct development track record to demonstrate successful delivery of previous schemes. Traditional banks often struggle to support projects where the borrower cannot evidence prior development experience, regardless of their wider property knowledge.

In this case, however, the client brought significant strengths that specialist development lenders were able to assess differently. They had extensive experience within the property sector through their estate agency business, previous involvement with local planning decisions, and a strong understanding of the local market. They had also assembled an experienced professional team consisting of a builder, architect and planning consultant, with whom they had established working relationships.

Another consideration was the development appraisal itself. An independent consultant had prepared a comprehensive schedule of costs using deliberately cautious assumptions. Construction costs were based on worst-case scenarios, including allowances for potential material price inflation and VAT assumptions that may ultimately prove overly conservative. While this increased headline costs, it also demonstrated prudent project planning.

The projected Gross Development Value (GDV) created a strong development margin, but lenders still needed confidence that build costs, planning considerations and delivery risks were adequately managed.

Structuring the Right Development Finance Solution

Working closely with the client, Elizabeth Powell structured a development finance facility designed to balance leverage, cashflow and lender confidence.

Rather than seeking maximum leverage, the strategy focused on securing sufficient day-one funding whilst maintaining conservative overall lending levels. This proved particularly important given the borrower's lack of formal development track record.

The agreed facility provided a total gross loan comprising an initial advance and a development facility released in stages as construction progressed.

This structure delivered several advantages.

• Firstly, the day-one advance immediately improved liquidity and reduced pressure on the client's working capital position. Although the client retained capital from earlier funding arrangements and had access to other property assets, preserving cash reserves throughout a development project provides valuable flexibility should unexpected costs arise.

• Secondly, the staged drawdown approach aligned lender exposure with construction progress. Funds would only be released following monitoring surveyor approval, ensuring costs remained controlled and reducing overall project risk.

• Thirdly, the facility utilised rolled-up interest, meaning no monthly mortgage payments would be required throughout the development period. This is particularly valuable for projects where income generation occurs only after completion and refinance.

Alternative funding routes were considered. Additional borrowing against the client's unencumbered residential property and wider portfolio could have increased available capital. However, this would have created unnecessary complexity and potentially reduced flexibility elsewhere within the client's overall property strategy.

The chosen structure concentrated debt within the development itself whilst preserving other assets for future opportunities.

Creating a Clear Exit Strategy

One of the most important aspects of any development finance application is the proposed exit.

Specialist lenders are able to take a more pragmatic view of development projects, but they remain heavily focused on how facilities will ultimately be repaid.

In this case, the exit strategy was straightforward and credible. Upon completion, the newly created residential units would be refinanced onto longer-term investment finance, allowing the development loan to be redeemed.

This approach benefited from several favourable factors. The completed scheme would produce income-generating residential assets, the projected GDV provided a significant equity buffer, and the client already had experience managing investment properties within their wider portfolio.

The commercial elements also added stability to the overall project. One commercial unit was already occupied, while the second unit was expected to be let once renovation works were completed, creating an attractive mixed-use investment proposition.

This combination of development uplift, rental income potential and refinance viability strengthened lender confidence throughout the underwriting process.

Key Takeaways

What made this transaction possible was not simply the strength of the property itself, but the way the overall project was presented and structured. While the borrower lacked direct development experience, lenders were able to assess their wider property expertise, planning knowledge, professional team and realistic project assumptions.

Traditional lenders often struggle to accommodate first-time developers because their underwriting models place significant emphasis on completed project history. Specialist development lenders are able to consider the wider picture, including project viability, professional support, asset quality and exit strategy.

For borrowers considering commercial-to-residential conversions, careful preparation of cost schedules, planning documentation and refinance strategies can significantly improve funding options. This is particularly relevant for investors exploring bridging finance strategies, complex property structures or larger-scale development opportunities.



The case demonstrates that a lack of direct development experience does not automatically prevent access to development funding. With the right structure, realistic assumptions and experienced professional support, first-time developers can secure funding for ambitious projects where the underlying fundamentals are strong.