One of the biggest challenges that developers face throughout their projects is managing cash flow. Securing finance can be hard enough, but when delays can be expensive at best, and catastrophic at worst, ensuring cash is always available is crucial.
That means developers need to understand how the drawdowns work across different loan types and build a robust cash flow plan around them. In this blog, we explore how drawdowns work for the types of loans we provide, and give you some advice to help make your project run smoothly.
How do Property Development Drawdowns Work?
Rather than releasing 100% of the funds at the beginning of the project, some property development loans are released in stages, either in monthly instalments or when specific milestones are hit.
That said, due to their short-term nature, Bridging Loans, Exit Finance and some Pre-Completion Loans are often released in full.
Development Finance
As one of our most common property development loans, we typically offer development finance with loan terms between 1 and 15 months and up to £3,000,000. Generally, these are used to fund the purchase of land and/or the build itself.
During the build phase, we usually release funds on a monthly basis. However, in some instances, we may prefer to release funds at key points, such as buying the land, when building work starts, and at construction milestones such as completion of foundations, the walls and roofing, internal work, and overall completion.
See Property Development Loans >
Equity Finance
Equity financing works in a very similar way, and our agreement with you may depend on factors such as the project itself, your experience levels and whether we’ve had a previous professional relationship.
However, equity finance can be more flexible in terms of how and when drawdowns happen, due to our equity in the project.
Pre-Completion Loans
Pre-completion loans may be released in stages, depending on the project. These loans are typically for completing the last stages of the build and covering costs before it’s refinanced or sold. Therefore, there aren’t many more milestones to hit.
However, where a project has multiple units, we may offer Pre-Completion Finance on a per-unit basis.
How to Effectively Plan & Manage Construction Cash Flow
We have written in-depth about how to manage cash flow during a development project, but to summarise, effective planning and ongoing visibility of your financial situation are the keys to ensuring you have the funds available when you need them and can navigate unexpected problems.
Let’s take a look.
Plan Extensively
A realistic budget is essential for good cash flow management. It’s important to account for every cost, such as:
- Land acquisition
- Planning and legal fees
- Design
- Materials and labour
- Contingency
- Interest on loans
We know that material costs are expected to rise in 2026 anyway, but the ongoing conflict in Iran could cause a range of unforeseen problems in the construction industry. Therefore, have an experienced developer, consultant, or lender stress-test your plan against worst-case scenarios before work begins, wherever possible.
Forecast Money Movements
Map out a detailed cash flow forecast, tracking when money will arrive via loan drawdowns or property sales, against when it will need to go out to contractors, suppliers, and lenders. Given how common delays in planning approvals and construction can be, build these into your projections from the outset.
As a general rule, anywhere between 5% and 15% of your total project budget is a contingency fund, but in the current construction climate, you may want to go even higher.
Weekly & Monthly Cash Flow Monitoring
Regular monitoring throughout the project is essential. Not only will it help you stay on top of your current situation, but you’ll be better placed to spot potential problems early and find solutions. These could include unpaid invoices, material delays, or rising costs.
Weekly forecasting will give you top-level oversight, while more in-depth monthly reporting can help you get into the details. Many property developers use property-specific accounting tools and services to help them stay on top of things.
Securing Property Development Finance to Keep Your Project on Track
We’ve been working in property development long enough to know that sometimes, even with the best planning, things can go wrong. If you find yourself in this situation, it’s important to stay calm but take proactive actions to rectify the problem.
For example, you may be able to negotiate an early release of funds, restructure a loan agreement, or agree on new payment terms with a supplier. Likewise, additional financing, such as a bridging loan or exit finance, can help plug the gap and keep your project alive.
If this is the case, don’t hesitate to contact us. We’re always eager to work with talented and ambitious developers across the South East to turn ideas into reality.
