Written by Lee Merrifield
September 2026
Behind every property finance deal are individuals who are responsible for assessing risk, reviewing project viability and deciding whether funding can proceed.
More often than not, and depending on the deal size and complexity, this takes the form of a credit committee. From borrower experience and build costs to market conditions and exit strategies, the committee plays a vital role in ensuring each deal is commercially viable for both lender and borrower.
One of the roles of the Credit Committee isn’t to prove a deal will fail, but to understand how it performs when things don’t go exactly to plan. If build costs increase, sales take longer than expected or market conditions soften, the committee wants confidence that the project has sufficient headroom, remains viable and the loan can still be repaid.
Across the development finance market, no two funding opportunities are ever the same. Yet the questions that the committee asks are often remarkably consistent.
As MSP Capital Credit Director, I recently spoke at the Bristol Property Developer Show.
I shared my insights into what lenders, and their Credit Committee, really look for when assessing a development funding proposal, why some deals are approved and why others are declined.
Starting Out: The Early Stages of the Funding Process
Before a deal reaches the Credit Committee, a developer will usually have already completed significant preperation.
At the earliest stage, the developer will have run the numbers, researched the market, assessed build costs and agreed the purchase. Once the viability of the project has been assessed, the next step is securing funding to deliver the scheme.
The developer approaches a lender, submits an application and receives initial funding terms based on the projected deal figures.
Following agreement in principle, the applicant pays the initial fees to allow the funding assessment and formal due diligence process to begin. This typically includes valuation reports, legal work and Independent Monitoring Surveyor (IMS) reviews.
What lenders look for in a good deal
Every member of the Credit Committee brings a different perspective to the discussion. Some naturally focus on construction risk, others on market conditions, borrower experience or financial resilience. Rather than searching for reasons to decline a deal, the conversation is usually centred around one question: “Are we comfortable that this project will succeed, even if things become more challenging than expected?”
When assessing a development funding proposal, lenders will typically review both the strength of the deal and the underlying borrower.
Key aspects a lender is looking for to support a deal include:
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Developer experience and track record
This isn’t simply about the number of projects completed. Lenders want to see experience that is relevant to the scheme being proposed. A developer moving from refurbishments into a £10 million development will naturally attract greater scrutiny than one progressing gradually.
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Realistic assumptions
The numbers need to stand up to scrutiny. Build costs, sales values, timescales and contingencies should be realistic and supported by evidence, rather than relying on everything going exactly to plan.
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Good location and the right property type
Lenders will consider whether the proposed development suits the local market and whether there is sufficient demand for the finished properties at the anticipated price point.
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A strong professional team
Experienced contractors, architects, surveyors and other advisers can give a lender greater confidence that challenges will be identified and managed effectively.
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Financial resilience
Lenders want to understand what resources are available beyond the immediate project. If costs increase or the programme overruns, does the developer have the capacity to absorb it?
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Transparent and honest approach
Problems don’t necessarily make a deal unfundable, but surprises can undermine confidence. Being open about challenges allows the lender to properly assess and work with the risks.
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Clear exit / repayment strategy
Whether the intended exit is sale or refinance, it needs to be credible. The committee will also consider what happens if the preferred exit takes longer or doesn’t perform as expected.
Why deals fail
Not every deal that receives initial support will progress through to completion. During the due diligence phase, lenders continue to assess the strength of the project, the borrower and the overall risk profile of the deal.
What are the most common reasons?
- GDV not supported by the valuer
- Overly ambitious projects
- Unviable projects due to low profit margins, build costs too low or insufficient contingency
- Developers becoming financially overstretched or presenting poor credit history
- Challenging market conditions not aligned to the local market demand
- Weak exit strategy
Good developers don’t always make good deals
One of the biggest misconceptions about development finance is that an experienced developer in a good location will always secure funding. In reality, the Credit Committee looks at how every element of the proposal works together.
For example, one experienced South Coast developer sought funding for a seven-apartment scheme with a GDV of more than £11 million. On paper, many of the fundamentals were attractive. However, the committee identified several factors that increased the overall risk. The apartments were entering a challenging market, the build itself was technically complex, the borrower had relatively little capital committed to the scheme and was already delivering another significant development.
By contrast, another experienced developer in the same region proposed two contemporary detached homes. Although a smaller project, it aligned well with local demand, used conventional construction, required a more proportionate level of borrowing and represented a sensible next step given the developer’s existing commitments.
Neither application succeeded or failed because of one issue. Instead, the committee considered how all of the risks interacted. One proposal presented several small and manageable risks in isolation but that, together, became significant. The other represented a balanced proposition where the developer’s experience, financial commitment and project complexity were all aligned.
Key takeaways: Managing risk in development funding
Property development funding is not about removing all risk. There will always be risk associated with property development and lending money – it’s about mitigating and managing it.
Looking inside the Credit Committee, one theme becomes clear: lenders are not looking for perfect deals. They are looking for well-considered deals. The strongest applications aren’t necessarily the most ambitious; they’re the ones where the developer understands the risks, has realistic assumptions and demonstrates the experience and financial resilience to deliver successfully.