How much equity a development facility really needs.
Development lenders do not ask for a deposit. They test your equity against two caps at the same time, and the one that bites is rarely the one you modelled. The good news: equity is not the same as cash, and the difference is usually the land you already own.
By Dominic Whitecross, Co-Founder, HyLend. Last reviewed September 2026.
The short answer
A senior development lender will typically fund 85% to 90% of total project cost, capped at 65% to 70% of gross development value. Your equity is whatever those caps leave uncovered, and on most schemes that is 10% to 15% of cost, or more where the margin is thin.
The word deposit is misleading here because a large part of that equity is usually already in the scheme before the facility is drawn: the site, the planning, the professional fees, the enabling works. Whether a lender recognises it is the question that decides the cash you actually put in.
The two caps, and why the second one bites
Every senior development facility is tested against both limits. The lower answer wins.
| Scheme | Total cost | GDV | 85% of cost | 65% of GDV | Facility | Your equity |
|---|---|---|---|---|---|---|
| Healthy margin | £3.0m | £4.0m | £2.55m | £2.60m | £2.55m | £450,000 (cost binds) |
| Thin margin | £3.0m | £3.6m | £2.55m | £2.34m | £2.34m | £660,000 (GDV binds) |
Same cost, same leverage policy, £210,000 more equity because the GDV is lower. This is why the valuer's view of GDV matters more than your appraisal, and why a multi unit scheme valued on an aggregate or single lot basis can demand more equity than the sum of the unit prices suggests. The GDV a valuer will actually use →
What counts as equity
- The site at current value. If you own the land outright, or with a low charge, its value can be recognised as equity. This is the largest single item on most schemes and the one lenders differ on most.
- Planning and pre commencement spend. Planning fees, professional fees, surveys, section 106 and CIL already paid, enabling works. Real money already in the ground, which a good lender recognises and a conventional one may not.
- Cash at drawdown. The simplest form and the one every lender accepts, but the one you want to minimise.
- Deferred land payments and vendor arrangements. Sometimes recognised, sometimes not, always disclosed.
A scheme we arranged on exactly this point
A developer with full planning for 34 houses had discharged every pre commencement condition and put real capital into the site. A conventional facility wanted fresh cash equity at drawdown, ignoring what was already invested. Structured so that land value and planning spend were recognised as equity, the bank funded the build at roughly 65% LTGDV and up to 95% loan to cost with no further cash from the client.
Reducing the cash further
Mezzanine finance sits behind the senior lender and can lift combined leverage to around 80% of GDV or 90% of cost, so your cash equity falls to 10% or less of cost. It is priced for the position it takes and needs an intercreditor agreement, which adds weeks. Mezzanine finance →
Equity and preferred equity partners can take the position above mezzanine on larger schemes, in exchange for a share of profit rather than a coupon. That is a structuring conversation rather than a product. Equity and structured capital →
What none of these do is remove the personal guarantee, which on most development facilities is 10% to 25% of the loan and assessed against your net worth. Treat it as part of the equity picture rather than a formality.
Test the two caps on your own numbers
Both development appraisal templates show which cap binds and the equity that leaves you to fund.
- Development appraisal, basic one page.
- Development appraisal, detailed with the monthly cash flow.
Development finance equity FAQs
How much deposit do you need for development finance?
Development lenders think in equity rather than deposit, and test it two ways at once. Loan to cost is usually capped at 85% to 90%, so you fund 10% to 15% of total project cost. Loan to gross development value is usually capped at 65% to 70%. Whichever limit binds first sets your equity, and on a scheme with a thin margin it is the GDV cap that bites, not the cost cap.
Does the land I already own count as equity?
Yes, and this is the most important point on this page. If you own the site outright, or with a low charge, its current value can be recognised as your equity contribution in full or in part. The same applies to planning costs and pre commencement spend already incurred. A lender that recognises committed capital properly can fund the entire build with no further cash from you.
What is the difference between equity and cash?
Equity is what you have committed to the scheme in whatever form: land, planning spend, works already done, or cash. Cash is what you pay on the day. Lenders vary enormously in how much of the non cash equity they recognise, and conflating the two questions is how good schemes are turned down. The right question to a lender is not how much cash do you need, it is how much of my committed capital will you recognise.
Can mezzanine finance reduce the equity I need?
Yes. A mezzanine facility sits behind the senior lender and can take combined leverage to around 80% of GDV or 90% of cost, reducing the equity you fund to 10% or less of cost. It is priced accordingly and requires an intercreditor agreement with the senior lender, so it adds both cost and time. On the right scheme it is the difference between doing one project and doing two.
Why does the lender want more equity than the loan to cost suggests?
Because the loan to gross development value cap is binding. On a scheme costing £3m with a GDV of £4m, 85% of cost is £2.55m but 65% of GDV is £2.6m, so cost binds and you fund £450,000. On the same cost with a GDV of £3.6m, 65% of GDV is £2.34m, so GDV binds and you fund £660,000. The thinner the margin, the more equity the GDV cap demands, which is why the valuer's view of GDV matters so much.
Is a personal guarantee required as well?
Almost always, where the borrower is a company. Personal guarantees on development facilities are typically 10% to 25% of the loan rather than the whole facility, but they are a real liability and lenders will assess your net worth behind them. Treat the guarantee as part of the equity conversation rather than a formality at the end.