Phased development finance has become one of the most discussed funding structures in 2025. As developers face sustained cost inflation, longer build timelines, and tighter liquidity, multi-stage funding is increasingly seen as the only practical way to deliver large-scale or multi-use schemes.
However, while the concept of releasing capital in drawdown tranches isn’t new, the way lenders structure, monitor, and stress-test those stages has changed markedly in the past 18 months. Banks, private lenders, and debt funds are now far more forensic about valuation timing, monitoring surveyor (IMS) oversight, and cross-phase dependencies.
At Willow Private Finance, we’re helping developers and investors structure facilities that align cashflow with build progress, ensuring each stage is fully funded without excess debt drag or liquidity gaps. As whole-of-market brokers, we know precisely how different lenders are now viewing phased schemes — and how to negotiate flexibility where it matters most.
For further context, see our insights on Development Finance in 2025: What’s Changed and What Lenders Want Now and LTV, LTC, and GDV: The Three Numbers That Shape Your Property Deal.
The UK development landscape in 2025 remains highly polarised. Prime city regeneration schemes and institutional-backed build-to-rent projects continue to attract funding, while smaller speculative developments often face stricter scrutiny.
Lenders are dealing with persistent build cost inflation, with materials still 15–20% above pre-pandemic levels and labour shortages particularly acute across the South East. This volatility has forced lenders to build in higher contingency requirements and shorter drawdown windows to reduce exposure.
Rising base rates have also influenced the way lenders view phased projects. The increased cost of funds has pushed some developers toward stretch senior and mezzanine layers — but that additional leverage often comes with tighter control of release triggers. The result is a more structured, data-driven funding environment where lenders demand full visibility over each phase’s progress, valuation, and exit plan.
Environmental, Social, and Governance (ESG) compliance is another lens now shaping funding appetite. Lenders want assurance that schemes meet BREEAM, EPC, or biodiversity targets early in the design phase — especially for multi-stage builds where later phases might need to reflect higher standards.
Phased development finance is typically structured as a single overarching facility with drawdowns tied to defined milestones. Funding is released once specific stages are complete and verified, ensuring that capital is always proportionate to work completed and remaining risk.
For example, a four-phase mixed-use scheme might allocate initial funds for site acquisition, demolition, and enabling works. The next tranche may follow after substructure completion, with further releases aligned to superstructure, internal fit-out, and final completion.
Each release is approved only after an independent monitoring surveyor (IMS) inspects progress and issues an updated report. That report will assess build cost to date, cost-to-complete, and any risks that could affect the programme or valuation.
Phased development loans are usually based on loan-to-cost (LTC) or loan-to-gross-development-value (LTGDV) ratios, with limits varying by lender and sector. A typical senior lender might advance 65% of cost or 55% of GDV, while mezzanine providers might bridge the gap up to 85–90% LTC in some cases.
The complexity arises when each phase differs in timing or end use. Some developers sell completed units from earlier phases to recycle equity into later ones, while others hold the entire scheme to refinance once the project stabilises. The flexibility to adjust these strategies mid-way is what separates specialist lenders from traditional banks.
In 2025, valuation timing has become a defining issue in phased funding. Lenders now operate on tighter verification cycles, with IMS inspections often scheduled monthly or even fortnightly for complex builds.
Delays in issuing valuation reports can create a domino effect: contractors are left waiting for payments, subcontractors halt work, and the entire project timeline slips. To mitigate this, lenders and developers are increasingly using digital monitoring platforms, allowing real-time upload of progress photos, QS certifications, and on-site updates.
For lenders, these systems reduce the risk of over-advancing funds. For developers, they provide transparency and predictability, ensuring that drawdowns are triggered quickly once milestones are met.
Valuers are also paying more attention to market evidence between phases. If sales values in comparable schemes dip between Phase 1 and Phase 2, the updated GDV could fall — forcing recalculation of the overall facility size or drawdown limits. This makes proactive communication and ongoing re-appraisal planning critical.
The best-funded phased developments in 2025 share a few key characteristics:
1. Experience and Delivery Record
Lenders give priority to developers with a proven record of completing comparable projects. In multi-phase funding, past success directly reduces perceived risk and can unlock better pricing or higher leverage.
2. Transparent Cost Management
Detailed QS reports, cost-to-complete statements, and proactive change control logs are now mandatory. Lenders want evidence that overruns or variations are identified early and backed by contingency.
3. Cross-Phase Dependencies
Shared infrastructure — such as access roads, utilities, and landscaping — often creates interdependence. Lenders require clear cost apportionment across phases and comfort that early-phase works won’t compromise later progress.
4. ESG and Insurance Compliance
Environmental impact assessments, warranties, latent defect insurance, and construction bonds are all viewed as core risk mitigants. Many lenders will not fund beyond the first phase unless insurance conditions remain valid across all stages.
5. Exit Certainty
A phased scheme is only as strong as its exit. Whether through forward sales, term-loan refinance, or block disposal, lenders expect to see an evidence-based exit path with conservative absorption rates and realistic GDV assumptions.
Despite its advantages, phased funding presents several operational and financial challenges:
Liquidity Gaps and Delayed Drawdowns
If an IMS inspection or valuation report takes longer than expected, contractors may face cashflow strain. Some developers bridge these gaps using unsecured facilities, but this adds cost and complexity.
Valuation Downturns
A fall in comparable market values can lead to reduced drawdown limits or re-margin calls. This is especially problematic if a lender re-values between phases during a market correction.
Overlapping Timelines
When phases overlap, developers must manage concurrent funding streams, certification processes, and drawdown schedules — all while ensuring lender covenants remain intact.
Contingency Access
Contingency funds are typically locked and require formal approval to release. If cost overruns arise due to scope changes or inflation, delays in contingency approval can cause critical disruptions.
Exit Flexibility
Where early-phase sales underperform, developers may need to re-strategise — perhaps refinancing into a rental model or bridging into a term facility. Without flexible structuring upfront, this can become difficult or costly.
At Willow Private Finance, we help clients structure phased funding that anticipates both opportunity and volatility. A few strategies stand out in 2025:
Blended Capital Layers
Combining senior and mezzanine debt allows developers to reduce equity input and preserve liquidity between phases. For example, senior funding might cover 65% LTC, with mezzanine capital providing a further 15–20% to reduce cash strain.
Pre-Agreed Valuation Frameworks
Negotiating fixed drawdown triggers or benchmark valuations in advance helps prevent disputes mid-phase. Some lenders now allow independent QS verification to substitute for full valuations if agreed early.
Rolling Security and Partial Releases
Lenders may agree to release completed units or phases from the charge once repayment thresholds are met, enabling sales proceeds to recycle into future phases. This structure is especially useful in large regeneration or BTR projects.
Cross-Collateralisation Management
For schemes using multiple SPVs, lenders are more open to cross-collateralised structures that secure loans against multiple assets — provided the developer can demonstrate strong inter-company governance.
Interest and Fee Management
Staged interest roll-up or fee capitalisation ensures that costs align with cash inflows. Some lenders even offer “step-up” rates as each phase de-risks, rewarding successful delivery milestones.
A London developer is delivering a three-phase, 150-unit residential regeneration scheme. Phase 1 (60 units) is financed at 65% LTGDV with a senior facility from a private bank. As units in Phase 1 are sold, profits are recycled to fund Phase 2 under a new sub-facility with the same lender.
Willow structures a rolling facility agreement allowing GDV reassessment between phases without re-negotiating the entire loan. By embedding an agreed IMS schedule and predefined drawdown criteria, the developer achieves seamless liquidity across all three stages — with no idle capital costs.
The outcome: predictable funding, optimised leverage, and a 10% saving on total financing costs over the life of the project.
As the market becomes more data-driven, lenders will increasingly integrate live project tracking, drone verification, and cost-control software into their underwriting and monitoring processes. Phased finance is moving away from static spreadsheets toward continuous visibility.
We also expect a rise in hybrid joint-venture funding, where private equity or institutional investors partner with developers for specific phases — providing both equity and debt flexibility.
For developers, success will rely on transparency, documentation discipline, and a strong funding partner who understands how to synchronise drawdowns, valuations, and sales in real time.
Willow Private Finance specialises in complex development and phased funding. Our team works with the UK’s leading private banks, specialist lenders, and family offices to structure multi-stage facilities that adapt to evolving build schedules.
We understand how valuation timing, IMS oversight, and contingency management can impact cashflow — and we negotiate terms that ensure liquidity at every stage. Whether your project involves regeneration, modular delivery, or multi-block phasing, Willow provides tailored funding strategies that keep momentum moving from start to finish.
Q1: What is phased development finance?
A: It’s a funding model that releases capital in drawdown stages linked to verified construction milestones and valuations.
Q2: How do lenders control drawdowns in phased builds?
A: They rely on independent monitoring surveyor (IMS) inspections and cost-to-complete reports before each tranche is released.
Q3: What happens if a phase is delayed or costs rise?
A: Lenders may pause drawdowns until updated valuations are approved, or require top-up equity to maintain loan ratios.
Q4: Can completed phases be refinanced to fund later ones?
A: Yes, developers often recycle profits or refinance earlier stages to support ongoing works, provided the lender allows phased release.
Q5: Who offers phased development finance in 2025?
A: Specialist development lenders, private banks, and debt funds — often through structured facilities designed for multi-phase delivery.
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About the Author
Wesley Ranger is the Director of Willow Private Finance and has over 20 years of experience in property finance. He specialises in complex, high-value lending and development structuring for both UK and international clients. Wesley’s expertise spans phased funding, mezzanine layering, and lender negotiation, helping developers achieve optimal leverage and cashflow management throughout their projects.
Important Notice
This article is for general information purposes only and does not constitute personal financial advice. Development finance product availability, eligibility, and rates depend on your individual circumstances and may change at any time.
Always seek tailored advice before committing to any financial arrangement.
Willow Private Finance Ltd is authorised and regulated by the Financial Conduct Authority (FCA No. 588422). Registered in England and Wales.
