Development Finance Beyond the Build
Property development is rarely just about bricks and mortar. Behind every scheme lies a network of planning obligations—conditions attached by local authorities, Community Infrastructure Levy (CIL) charges, and Section 106 agreements—that shape the viability of a project.
In 2025, these obligations are more significant than ever. Rising construction costs and tighter planning scrutiny mean developers must not only build efficiently but also manage a raft of financial commitments before lenders will release funds. For investors and developers, understanding how these obligations intersect with finance is no longer optional—it is central to securing funding.
Planning Conditions: Unlocking Drawdowns
Planning conditions can range from the routine—such as landscaping requirements—to the critical, such as highway improvements or drainage works. For lenders, conditions are more than paperwork: they are milestones that determine when funds can be released.
A bridging or development facility may be approved in principle, but staged drawdowns depend on conditions being discharged. If a developer fails to meet them on time, the project stalls and costs spiral. Lenders are acutely aware of this risk, which is why they now scrutinise planning documentation closely before approving loans.
We examined similar risks in our blog on
development finance in 2025. The principle holds true: planning obligations are not a side issue—they are integral to funding.
The Growing Burden of CIL
The Community Infrastructure Levy (CIL) has become one of the most material costs in development. It is designed to ensure that developers contribute to local infrastructure, from schools to transport links. While the principle is widely accepted, the financial impact is significant.
In some boroughs, CIL charges can run into hundreds of pounds per square metre. For a medium-sized residential scheme, this translates into six- or seven-figure sums. Developers must either pay upfront or agree to staged payments, and lenders want assurance that these obligations are factored into the project’s cashflow.
Where developers underestimate CIL, lenders view the entire scheme as higher risk. This can lead to reduced leverage, higher pricing, or even refusal to lend. For borrowers, it is essential that CIL liabilities are modelled accurately and built into financial forecasts from the outset.
Section 106: Negotiation and Enforcement
Section 106 agreements, or planning obligations, are another key pressure point. These agreements commit developers to specific contributions—affordable housing, public open spaces, transport improvements—often in return for planning permission.
While Section 106 agreements can unlock development opportunities, they also create financial obligations that directly affect profitability. For lenders, the critical question is whether the developer can deliver both the scheme and the agreed contributions without overextending cashflow.
Experienced advisers can sometimes negotiate terms, reducing obligations or securing phased contributions. But lenders assume worst-case scenarios, which means developers must evidence how they will meet commitments even if negotiations fail.
Why These Obligations Matter for Finance
From a lender’s perspective, planning conditions, CIL and Section 106 all fall under the same category: contingent liabilities. They may not always be headline construction costs, but they represent material outgoings that must be covered before the scheme becomes profitable.
If these obligations are overlooked, lenders worry about two risks:
- Cashflow strain: Developers run out of liquidity before completing, jeopardising the scheme.
- Exit risk: Profits are eroded by unforeseen obligations, reducing the developer’s ability to refinance or sell.
These risks are not theoretical. Across the UK, schemes have stalled because CIL payments were underestimated, Section 106 agreements proved more onerous than expected, or planning conditions delayed drawdowns.
Insurance and Risk Mitigation
One under-discussed aspect of planning obligations is the role of insurance. Developers often assume their risks are limited to build costs, but insurers now offer products that protect against certain planning and compliance exposures.
At Willow, we integrate insurance alongside finance. This includes arranging structural warranties, performance bonds, and specialist covers that can provide reassurance to both developers and lenders. By packaging finance with appropriate insurance, we reduce lender anxiety and create more flexible funding terms.
This is particularly valuable where CIL or Section 106 obligations create uncertainty. A lender who sees that risks are mitigated by insurance, protection or guarantees is more likely to advance at higher leverage.
Case Study: Financing with Heavy Obligations
A recent Willow client purchased a site with planning permission for a mixed-use development. The scheme carried a substantial CIL liability and a Section 106 requirement for affordable housing contributions. The developer underestimated the cashflow impact, and initial lender appetite was weak.
We restructured the finance package, blending senior development debt with mezzanine funding to cover upfront obligations. We also arranged a warranty and performance bond to strengthen the risk profile. With the new structure, the project secured full funding, and the developer avoided the liquidity crunch that would have otherwise derailed the scheme.
The Risk of Going It Alone
Developers who approach lenders directly often fall into the trap of under-presenting planning obligations. Without specialist advice, they may downplay or omit CIL and Section 106 costs, only to face rejection once solicitors uncover them. This not only delays projects but also damages credibility with lenders.
The reality is that lenders are well aware of these obligations. Trying to sidestep them rarely works. Success lies in presenting a transparent, structured plan that shows how obligations will be met while maintaining project profitability.
Why 2025 Is Different
In previous cycles, lenders were more forgiving. They might advance funds with minimal regard to planning obligations, trusting developers to handle them. In 2025, after years of regulatory tightening and market volatility, that leniency is gone. Every contingent liability is scrutinised, every CIL charge is modelled, and every Section 106 agreement is tested for affordability.
For developers, this creates higher barriers—but also rewards those who plan carefully. A well-structured application, with obligations fully accounted for, is more likely to secure favourable terms than a superficially stronger deal that conceals risks.
How Willow Private Finance Helps
At Willow, we combine deep experience in development finance with an understanding of planning obligations.
We engage early with developers, reviewing planning conditions, calculating CIL liabilities, and analysing Section 106 commitments. We then structure finance that anticipates these costs, whether through senior lending, mezzanine solutions or securities-backed facilities.
Crucially, we also integrate insurance solutions—from warranties to business protection—that give lenders confidence and provide developers with a safety net. By presenting a transparent, risk-managed structure, we unlock funding that might otherwise be unavailable.
📞 Want Help Navigating Today’s Market?
Book a free strategy call with one of our development finance and insurance specialists.
We’ll help you structure borrowing that covers every obligation—without putting your project at risk.
