Development finance for primary care

What development finance is

Development finance funds a project rather than a completed asset. It covers ground-up construction of a new primary care centre, dental surgery or care development, or the conversion of an existing building into healthcare use. Because there is no finished, income-producing asset to lend against at the start, it works differently from a standard commercial mortgage, with funding geared to the cost and the value the scheme will create.

Property development finance covers more than primary care. The same lending funds commercial development such as a clinic or pharmacy, residential development such as flats or houses, and mixed schemes that combine the two, for example a surgery with residential above. Whatever the property type, the principle is the same: the finance funds the project as it is built rather than lending against a finished asset.

Lenders size a development loan against two figures: the total project cost and the gross development value, which is what the finished scheme will be worth. The funding usually covers a large share of the build cost, with the developer contributing the balance and any land equity. Full funding of one hundred per cent of cost is rare on its own, though it can sometimes be approached by combining the developer's land value with the loan. Different types of property development loans suit different schemes, from a single commercial development to a larger residential development.

How development finance works

Funds are typically released in stages as the build progresses, against a programme and valuations, rather than as a single lump sum at the outset. Each drawdown is checked, often by a monitoring surveyor, before the next tranche is released, so the lending tracks the work actually done. Interest is usually rolled up or serviced through the build, and the loan is repaid in full at the end from the exit.

For smaller or faster schemes, bridging finance can sit alongside or ahead of development finance, for example to secure a site quickly before the full development facility is arranged. Bridging loans are short-term loans repaid from the development loan or a sale, and they are a common first step on a project. The right structure depends on the size of the scheme, the timescale and the work involved, and a broker can match the project to lenders, whether high street banks or specialist development funders, who lend on healthcare development.

How lenders assess a scheme

Lenders look at the cost of the project, the gross development value on completion, the experience of the development team, the planning status and the exit. For healthcare schemes the exit is often a long-term mortgage once the premises are built and let or occupied, or a sale. A credible end use, such as a primary care tenant on a long lease, strengthens the development finance case considerably.

We arrange development funding for healthcare and primary care schemes and, where it fits, the longer-term facility that takes out the development loan on completion. Development finance lenders favour developers with a track record and a clear, deliverable plan, so the strength of the team and the quality of the costings carry real weight.

The application process

The development finance application process is more detailed than a standard property loan because the lender is funding a project, not buying a finished asset. You would expect to provide the costings, the programme, the planning position, the professional team and a clear exit, and the lender then reviews how the development works and how it will be repaid. Specialist development finance lenders, rather than a high street bank, fund most healthcare schemes, so knowing which lenders to approach saves time.

A broker who arranges development finance regularly can run the process for you: presenting the scheme to the right development finance lenders, negotiating the loan and the rate, and coordinating the monitoring surveyor through the build. Because property development is detail-led, a well-prepared application moves through the process far more smoothly than one that arrives incomplete, and it gives lenders the confidence to back the project.

Costs, interest and the exit

The cost of development finance reflects its short-term, higher-risk nature, so the rate sits above a standard commercial mortgage, and there are usually arrangement and exit fees and the cost of the monitoring surveyor. Interest is often rolled up, meaning it is added to the loan and paid at the end rather than serviced monthly, which keeps cash free during the build but adds to the total repaid. Understanding the full cost, not just the headline rate, is part of judging whether a scheme stacks up.

The exit is what repays the facility, and lenders look at it as closely as the build. For a healthcare scheme the exit is usually a sale of the completed premises or a refinance onto a long-term commercial mortgage once the building is let or occupied, often by a primary care tenant on a long lease. A clear, deliverable exit is what gives a lender the confidence to fund the project, so plan it from the outset rather than leaving it until the build is underway. We can arrange both the development loan and the longer-term facility that takes it out.

Preparing a development case

Have your costings, programme, planning position, the team's track record and a clear exit ready. Development lending is detail-led, and a well-prepared scheme moves more smoothly through application and drawdown. Build a contingency into the budget, because construction projects rarely run exactly to plan, and a buffer protects both you and the lender if costs move.

Commercial finance of this kind is not regulated by the Financial Conduct Authority. Any rates or terms are indicative and subject to status, valuation and full lender approval. This is general information, not financial advice; take independent professional advice before borrowing.