You do not always need full planning permission before applying for development finance.

But planning status can materially affect:

which lenders are available;

how much they may be prepared to lend;

how the property is valued;

when development funds can be released;

and how much equity the developer may need to contribute.

Some projects already have full planning permission when finance is arranged.

Others may be relying on:

permitted development rights;

prior approval;

an existing consent that needs amendment;

or a planning application that is still being determined.

A developer may even acquire a site before planning is secured and use a different form of short-term finance while the planning process continues.

The useful question is therefore not simply:

“Do I have planning permission?”

It is:

“What planning risk still exists, and which type of finance is appropriate at this stage of the project?”

Do development lenders require planning permission?

For a full development finance facility intended to fund construction, many lenders will generally want a sufficiently established planning position before substantial building funds are advanced.

The lender needs confidence that the proposed development can lawfully be delivered.

That might mean the project has:

full planning permission;

an acceptable permitted development route;

prior approval where required;

or another sufficiently clear planning basis.

But that does not necessarily mean finance cannot be discussed or arranged before planning is finalised.

The funding may simply need to be structured differently.

Can you apply for development finance before planning is granted?

Potentially, yes.

A developer may approach lenders while:

a planning application is pending;

conditions are being discharged;

prior approval is being sought;

or amendments to an existing permission are being progressed.

This can be useful because finance should ideally be considered before the developer becomes committed to the project.

The lender may be able to provide:

indicative terms;

an initial credit view;

or a structure that becomes available once agreed planning conditions are satisfied.

A formal development drawdown may still be conditional on the required consent being in place.

Can a lender issue terms subject to planning?

Potentially.

A lender may be willing to assess:

the borrower;

site;

proposed scheme;

development costs;

expected GDV;

and exit

before final planning is secured.

The proposed facility can then be conditional on planning reaching an acceptable position.

This does not remove planning risk.

It allows the financing work to progress alongside the planning process.

Why does planning matter so much to a development lender?

Because planning affects the value and deliverability of the site.

Consider the difference between:

a site with no residential permission

and

the same site with consent for 20 apartments.

The property may have a materially different value once the development rights are established.

The lender also needs to know that the scheme it is financing can legally be built.

Planning therefore influences both:

security value;

and construction risk.

Does a site with planning permission make development finance easier?

Potentially.

An implementable planning consent can remove a major source of uncertainty.

The lender can then concentrate more heavily on:

construction;

costs;

developer experience;

leverage;

GDV;

and exit.

But planning permission does not make a development automatically financeable.

A scheme can have consent and still have problems involving:

economics;

construction;

title;

access;

viability;

or marketability.

Planning is one part of the lending case.

What does “full planning permission” mean?

Broadly, full planning permission authorises a specific development subject to the conditions attached to the decision.

The developer then needs to ensure those conditions are dealt with appropriately.

Some conditions may need to be discharged before:

construction begins;

particular works occur;

or occupation takes place.

A lender should therefore look beyond the words:

“planning granted.”

It needs to understand whether the consent is actually capable of supporting the development programme.

Can planning conditions affect development finance?

Yes.

A consent may contain conditions relating to matters such as:

materials;

access;

highways;

drainage;

landscaping;

contamination;

archaeology;

construction management;

or other site-specific matters.

Some may be relatively straightforward.

Others can materially affect:

timing;

cost;

and construction.

The lender may want certain conditions discharged before releasing some or all of the development funding.

What is a pre-commencement condition?

A pre-commencement condition is a planning condition that must generally be satisfied before the relevant development begins.

This can be particularly important for finance.

If the lender releases development funds but construction cannot lawfully start because a critical pre-commencement condition remains outstanding, the project can immediately fall behind programme.

The lender and developer therefore need a clear view of:

which conditions remain;

when they will be discharged;

and whether they affect the first drawdown.

Does every development require full planning permission?

No.

Government planning guidance confirms that some development can proceed under nationally granted permitted development rights rather than through a full planning application, subject to the relevant limitations and conditions.

This means the lender needs to understand the specific planning route rather than simply asking whether there is a conventional permission.

What are permitted development rights?

Permitted development rights are a national grant of planning permission for certain forms of development.

Where the relevant right applies and its conditions are satisfied, a conventional full planning application may not be required.

However, permitted development rights are subject to:

limitations;

conditions;

geographic restrictions;

and, in some cases, prior approval.

They can also be removed or restricted in particular areas, including through Article 4 directions.

The developer should therefore establish that the right genuinely applies to the specific property.

What is prior approval?

Prior approval is a process attached to certain permitted development rights.

The local planning authority considers specified matters before the development can proceed.

Government guidance explains that prior approval is required under some change-of-use and other permitted development rights, with the authority limited to considering the matters specified by the relevant legislation.

The existence of permitted development rights therefore does not always mean a developer can simply start work immediately.

Can prior approval be enough for development finance?

Potentially.

If the project is lawfully deliverable under permitted development and the required prior approval has been secured, some lenders may treat that as an acceptable planning route.

The lender will still want to understand:

the exact permitted development class;

prior-approval decision;

limitations;

implementation requirements;

and any other consents required.

The fact that a full planning application was not required does not make the project planning-free.

Do permitted development rights replace building regulations?

No.

Government guidance is explicit that permitted development rights do not remove the need to comply with other consent or regulatory regimes, including building regulations.

A developer may therefore have a clear planning route but still need:

building control approval;

listed building consent where relevant;

environmental permissions;

party-wall arrangements;

or other consents.

Development finance underwriting needs to consider the complete delivery position.

Can an Article 4 direction affect permitted development?

Yes.

Local planning authorities can use Article 4 directions to restrict particular permitted development rights in defined areas. Government guidance expressly confirms that permitted development rights can be limited or withdrawn in this way.

This can be particularly important for developers acquiring property on the assumption that a particular change of use will be available.

Planning due diligence should be completed before that assumption forms the basis of the finance case.

What if the site only has outline planning permission?

Potentially, finance can still be discussed.

But outline planning generally leaves important matters to be approved later.

These could include:

appearance;

access;

landscaping;

layout;

and scale,

depending on the permission.

A lender needs to understand how much development certainty exists before committing full construction funding.

The project may need reserved matters approved before it becomes ready for standard development finance.

What are reserved matters?

Reserved matters are details left for later approval following an outline planning permission.

Until those matters are approved, the developer may not have the same degree of certainty over exactly what can be built.

That can affect:

construction pricing;

final unit mix;

GDV;

and development programme.

The lender therefore needs to distinguish between:

planning potential

and

a construction-ready consent.

Can you buy a site before planning permission is granted?

Yes, potentially.

Developers frequently acquire sites with:

no planning;

outline planning;

planning potential;

or applications underway.

The issue is how the acquisition is financed.

A standard development lender may not want to advance the full proposed construction facility while planning risk remains.

Alternative structures can include:

bridging finance;

land finance;

acquisition finance;

or a bespoke planning-risk facility.

Can bridging finance be used while planning is obtained?

Potentially.

A short-term bridge can sometimes fund the acquisition while the developer works through the planning process.

Once the required consent has been obtained, the property may then be refinanced onto development finance.

This can create a structure of:

acquisition bridge

followed by

development finance

followed by

sale or refinance.

But each financing stage introduces cost and execution risk.

The eventual development refinance should therefore be considered before the site is purchased.

Is buying without planning riskier?

Generally, yes.

Without planning permission, the developer does not yet know with certainty whether the proposed scheme can proceed.

Potential outcomes include:

permission granted as expected;

reduced scheme;

additional conditions;

delay;

refusal;

or an appeal.

That uncertainty affects both:

site value;

and repayment strategy.

The financing should therefore reflect the planning risk actually being taken.

Can a lender fund the land value before planning?

Potentially.

The lender may assess the property primarily on its current value and current lawful use rather than the hoped-for value after planning.

For example, a site may be worth:

£1 million without planning

but potentially:

£2 million with planning.

A lender financing before consent may place greater weight on the £1 million current position.

The developer should not assume that expected planning uplift can be borrowed against before it exists.

Can expected planning uplift form part of the lender’s decision?

Potentially as context.

But a future planning gain is not the same as existing value.

The lender may consider:

planning prospects;

local policy;

professional advice;

and the proposed scheme.

Still, the more uncertain the planning outcome, the more cautious the lender may be around leverage.

Is planning-risk finance more expensive?

Potentially.

Higher uncertainty can lead to:

lower leverage;

higher pricing;

additional security;

tighter conditions;

or fewer available lenders.

The exact terms depend on the project.

The principle is straightforward:

Capital exposed before planning certainty is generally taking more risk than capital advanced once the development is construction-ready.

Can development finance be agreed before all planning conditions are discharged?

Potentially.

It depends on the conditions.

A lender may be comfortable where remaining conditions are:

routine;

low-risk;

and unlikely to affect the project’s fundamental viability.

Other conditions may be critical.

For example, a condition affecting:

access;

contamination;

drainage;

or unit numbers

could materially affect the scheme.

The lender will therefore assess the substance rather than simply count how many conditions remain.

Do Section 106 obligations affect development finance?

Potentially.

A Section 106 agreement can create obligations connected with the development.

These may involve:

affordable housing;

financial contributions;

infrastructure;

or other planning obligations.

The lender needs to understand the financial and timing implications.

A development appraisal that excludes material Section 106 costs can materially overstate project profitability.

Does Community Infrastructure Levy matter?

Potentially.

Community Infrastructure Levy, or CIL, can represent a significant development cost where applicable.

The amount and payment timing need to be reflected in the appraisal and cash flow.

Planning guidance also notes that permitted development can still interact with CIL requirements in relevant areas, so the absence of a full planning application does not necessarily remove these obligations.

Appropriate planning and tax advice should be obtained for the specific scheme.

Can planning obligations affect staged drawdowns?

Yes.

If a material planning payment or obligation falls due during the development, the lender and developer need to know:

whether it is included in the approved development budget;

when it becomes payable;

and how it is funded.

A project can have sufficient construction finance on paper while still encountering a cash-flow problem if major planning-related costs were omitted.

Can lenders finance planning amendments?

Potentially.

Developers sometimes need to change an existing consent.

This could involve:

unit mix;

design;

layout;

specification;

or another aspect of the scheme.

Minor amendments may create limited additional risk.

Material amendments can affect:

GDV;

costs;

programme;

and planning certainty.

A lender may therefore want to approve the revised scheme before releasing further funds.

What is a Section 73 application?

Broadly, a Section 73 application can be used to seek permission to develop without complying with conditions attached to an existing permission, which can in practice be used to vary certain aspects of an approved scheme.

Where material changes are being proposed, appropriate planning advice should establish the correct route.

From a financing perspective, the lender needs to know whether the amended scheme remains legally deliverable and financially viable.

Can the developer change the scheme after the development loan has completed?

Potentially, but material changes may require lender consent.

The lender originally underwrote a particular project based on:

planning;

drawings;

costs;

programme;

and GDV.

If the developer later changes:

unit numbers;

size;

use;

design;

or construction scope,

the lender may need to reassess the facility.

A development loan is not automatically transferable to whatever scheme the borrower later decides to build.

Does planning history matter?

Potentially.

A site may have:

previous refusals;

withdrawn applications;

lapsed permissions;

appeals;

or historic consents.

These can provide useful context.

But an old permission should not automatically be treated as evidence that the current proposal will be approved.

Planning policy, local circumstances and the proposed development may have changed.

Can a lapsed planning permission support finance?

Potentially as evidence of development potential, but not as an existing permission.

If consent has expired without lawful implementation, the developer may need to obtain new planning permission.

The lender needs to understand the current legal position.

Historic planning value should not be confused with current development rights.

What if planning permission is about to expire?

This can be important.

The developer may need to demonstrate that the permission can be lawfully implemented before expiry.

The lender may want legal and planning confirmation around:

implementation requirements;

pre-commencement conditions;

and programme.

A theoretically valid consent can still create finance risk if there is insufficient time to activate it properly.

Can planning permission add value to a site?

Potentially, and sometimes materially.

A successful planning consent may transform a property from:

existing-use asset

into

development opportunity.

That uplift can strengthen the lender’s security position.

But the value created depends on the economics of the permitted scheme.

Planning for an unprofitable project does not automatically create meaningful land value.

Does the lender use the planning value or purchase price?

Potentially both, depending on the transaction and lender.

A developer may have bought a site before planning at a low price and then secured valuable consent.

By the time development finance is arranged, the property may be worth substantially more.

Some lenders may consider the current market value and equity created.

Others may apply restrictions based on:

purchase price;

timing;

and how recently the value uplift occurred.

The lender’s methodology matters.

Can planning uplift replace some of the developer’s cash equity?

Potentially.

Suppose a developer buys a site for £1 million using their own capital.

They later secure planning and the site is independently valued at £1.8 million.

That £800,000 value increase can represent substantial embedded equity.

A development lender may potentially recognise some or all of that current equity depending on its criteria.

This can reduce the amount of additional cash required when the development facility is arranged.

Does that mean developers should always secure planning before borrowing?

No.

There are situations where early finance is commercially necessary.

For example:

competitive acquisitions;

auctions;

option expiries;

distressed sales;

or strategic land purchases.

The correct structure may involve financing the planning-risk stage separately.

The important point is to match the debt to the stage of development risk.

Can an option agreement reduce the need for pre-planning finance?

Potentially.

Rather than buying the site immediately, a developer may secure:

an option;

conditional contract;

or another arrangement

while planning is pursued.

This can reduce the amount of capital committed before planning is known.

But the legal structure, option price and obligations require specialist advice.

The mortgage solution should follow the acquisition structure.

What is a conditional purchase contract?

Broadly, the developer agrees to purchase the property subject to specified conditions, which could include obtaining satisfactory planning permission.

This may reduce the need to finance the full acquisition before planning is resolved.

But sellers may prefer unconditional buyers.

The commercial and legal terms therefore vary.

Can finance be arranged for the planning costs themselves?

Potentially through specialist structures.

Planning a significant development can involve considerable expenditure on:

architects;

planning consultants;

surveys;

engineers;

environmental reports;

legal work;

and application costs.

Some developers fund this from equity.

Others may consider specialist planning or pre-development finance.

This is different from conventional construction development finance.

Why might lenders prefer the developer to fund planning costs?

Because planning expenditure occurs before the project has full development certainty.

If permission is refused, some or all of those costs may not generate a recoverable asset value.

Lenders can therefore view early planning expenditure as higher-risk capital.

A well-capitalised developer may choose to fund that stage personally, then introduce debt once planning is secured.

Can mezzanine or equity fund the planning stage?

Potentially.

Equity investors may be more comfortable taking planning risk where they believe the potential uplift justifies it.

Mezzanine or other specialist finance may also be available in certain structures.

But planning-risk capital should not be confused with ordinary senior development finance.

The return required will usually reflect the higher uncertainty.

Can a joint venture help with a planning-stage development?

Potentially.

A landowner and developer may structure a joint venture where:

the landowner contributes the site;

the developer contributes planning expertise and capital;

and another investor contributes finance.

This can reduce the immediate acquisition funding requirement.

The economic and legal arrangements can be complex and should be documented carefully.

What if planning is refused after the site has been financed?

Then the exit strategy becomes particularly important.

Possible options may include:

appeal;

revised application;

sale in existing use;

alternative development;

or refinance.

The lender financing the planning-risk stage should understand the downside case from the outset.

A loan that can only be repaid if planning permission is granted carries materially greater risk.

Does an appeal count as an exit strategy?

Not by itself.

An appeal may be part of the planning strategy.

But it introduces further:

time;

cost;

and uncertainty.

The financing still needs a credible repayment route if the appeal fails.

Planning success should not be treated as guaranteed.

How do lenders value a site without planning?

The valuer may consider:

existing-use value;

comparable land evidence;

development potential;

planning prospects;

and other relevant factors.

But the valuation basis may be more conservative than once consent exists.

The lender generally wants to know what the asset is worth today, not simply what it might be worth after a successful planning outcome.

How do lenders value a site with planning?

Once an implementable consent exists, the valuer can consider the approved development.

This may involve:

GDV;

construction costs;

professional costs;

finance;

developer profit;

and residual land value.

The planning consent can therefore provide much greater certainty around the property’s development value.

What is residual land value?

Residual land value is broadly the value left for the land after deducting the costs and required return of delivering the proposed development from the expected completed value.

A simplified concept is:

GDV

minus

development costs

minus

finance and other costs

minus

required developer profit

equals

residual land value.

Actual valuation work is more sophisticated.

But the principle shows why planning permission alone does not determine site value.

Can a consented project still fail lender viability tests?

Yes.

Suppose the scheme has:

GDV of £10 million;

but construction and other costs of £9.5 million.

The project may not contain enough margin to absorb:

delay;

cost increase;

or lower sales values.

The lender may therefore conclude that the project is too thin despite having full permission.

Planning establishes what can be built. It does not establish that it should be financed.

Does the lender need planning before instructing a valuation?

Not necessarily.

A valuation can potentially be carried out at different planning stages.

But the valuer needs clarity about what basis is being assessed.

That could include:

current value without planning;

current value with existing planning;

or completed GDV under the proposed scheme.

The lender should not rely on a valuation based on assumptions that have not yet been legally secured without understanding that distinction.

Should finance be considered before submitting planning?

Potentially.

Early lender input can help a developer understand whether the proposed scheme is likely to be financeable if approved.

For example, the funding review may identify that:

GDV is insufficient;

unit mix creates weak marketability;

leverage will be too high;

or too much equity will be required.

That information can potentially influence the development strategy before significant planning cost is incurred.

Should the lender dictate the planning scheme?

Not necessarily.

Planning and design should primarily respond to:

site;

market;

policy;

and development economics.

But financing is one part of those economics.

A highly ambitious scheme that requires a debt structure no lender will support may need reconsideration.

Planning, development appraisal and finance therefore need to inform each other.

Can development finance be arranged with a planning condition precedent?

Potentially.

A lender may issue a facility where completion or construction drawdown is conditional upon:

satisfactory planning;

discharge of specified conditions;

legal confirmation;

or another planning milestone.

This can allow the developer to progress:

valuation;

credit;

legal work;

and other finance preparation

while planning is being finalised.

Why can this be useful?

Because planning and finance both take time.

Waiting until the last planning condition is discharged before beginning any lender discussions can delay construction unnecessarily.

Conversely, assuming finance will automatically appear after planning is granted can also create risk.

Running the two workstreams in parallel can potentially provide greater execution certainty.

Can a lender change its terms if planning changes?

Potentially.

If the approved scheme differs materially from the proposal originally underwritten, the lender may reassess:

GDV;

costs;

loan amount;

leverage;

and exit.

For example, planning might reduce the scheme from:

30 units

24 units.

The completed value and development economics could change substantially.

Indicative terms should not automatically be treated as fixed where the underlying project changes.

What if planning increases the number of units?

That can potentially improve GDV.

But it may also increase:

build cost;

programme;

CIL;

Section 106 obligations;

infrastructure requirements;

and construction complexity.

More units do not automatically mean more profit.

The revised project should be reappraised before debt is increased.

Can lenders finance phased planning?

Potentially.

Larger developments may have:

outline permission;

several phases;

reserved matters approvals;

and different construction stages.

The facility can potentially be structured around a particular phase rather than the entire masterplan.

This can limit the lender’s exposure to future planning stages that are not yet sufficiently certain.

Can development finance fund only part of a larger site?

Potentially.

A developer may have consent for a substantial masterplan but choose to fund:

phase one;

one block;

or a defined parcel

separately.

The lender needs clear:

title;

security;

access;

infrastructure;

and development rights

for the financed phase.

The wider planning scheme still provides context.

What planning documents may a lender request?

Depending on the project, potentially:

planning decision notice;

approved drawings;

Section 106 agreement;

CIL information;

planning-condition schedule;

prior-approval decision;

lawful-development certificate;

reserved matters approvals;

planning consultant reports;

and details of any appeals or amendments.

The exact requirements depend on the development.

Why does legal due diligence matter?

Because planning approval is only one part of the site’s legal ability to deliver the scheme.

The solicitor may also need to consider:

title restrictions;

rights of way;

covenants;

easements;

access;

service rights;

and other property issues.

A development can have planning permission but still face legal obstacles to implementation.

What is the difference between planning risk and development risk?

Planning risk concerns whether the proposed scheme can lawfully proceed.

Development risk concerns whether it can then be:

built;

funded;

completed;

and exited successfully.

Securing planning reduces one major source of uncertainty.

It does not remove:

construction risk;

cost risk;

sales risk;

or finance risk.

The lender assesses the complete development lifecycle.

When is a project truly “development finance ready”?

There is no universal definition.

But a strong construction-ready project may have:

clear planning;

approved drawings;

sufficiently discharged conditions;

realistic build costs;

established professional team;

credible programme;

supportable GDV;

appropriate developer equity;

and clear exit.

At that stage, the lender can focus on financing execution rather than speculating about what development may eventually be permitted.

How should finance be approached where planning is not yet secured?

A useful framework is to consider six areas.

1. Current planning status

Is there no consent, outline permission, prior approval or full planning?

2. Acquisition

Does the property need to be purchased before the planning position is finalised?

3. Current value

What is the property worth today without relying on uncertain planning uplift?

4. Planning pathway

What approvals remain and how credible is the timetable?

5. Interim finance

Is bridging, land or another form of acquisition finance needed before development finance?

6. Final development facility

What funding becomes appropriate once the project is construction-ready?

This avoids trying to force one financing product across several different risk stages.

How Henry Dannell can help

At Henry Dannell Private Clients, we approach planning and development finance by first establishing exactly where the project sits.

That can include:

site acquisition;

planning application;

prior approval;

planning conditions;

construction readiness;

development budget;

GDV;

developer equity;

and

the final exit.

For one developer, full planning may already be in place and conventional development finance can be considered immediately.

Another may need to secure a site before planning is determined, requiring an acquisition or bridging facility before moving into development finance later.

A permitted-development project may have a different planning pathway again, with prior approval and other consents needing to be understood carefully.

And a larger scheme may have outline permission but require further approvals before construction funding can be drawn.

The objective is not simply to find a lender willing to accept less planning certainty.

It is to identify which type of capital is appropriate for the level of planning risk that still exists.

That distinction can protect the development from being financed too aggressively at the wrong stage.

The takeaway

You do not necessarily need full planning permission before applying for development finance.

Lender discussions can begin much earlier.

In some cases, acquisition or short-term finance may also be available before final planning is secured.

But the amount and type of borrowing can change materially depending on whether the development has:

no planning;

outline planning;

permitted development rights;

prior approval;

full planning;

or outstanding planning conditions.

Government guidance confirms that some development can proceed under permitted development rights without a full planning application, although conditions, limitations, prior approval and other consent regimes can still apply.

The useful question is therefore not:

“Can I get development finance without planning permission?”

It is:

“What planning risk remains today, and which form of finance is appropriate until that risk has been reduced enough for the full development facility?”

That is a more useful way to structure the project.

Planning certainty and financing capacity usually develop together. The stronger the development rights become, the more confidently lenders can assess the value, costs and construction funding required to deliver the scheme.

Important information

This article is for general information only and does not constitute personal lending, planning, legal, tax, investment, development or financial advice.

Planning law, permitted development rights, prior-approval requirements, planning conditions, Article 4 directions, Section 106 obligations, Community Infrastructure Levy and other requirements depend on the property, location, proposed development and legislation applying at the relevant time.

Permitted development rights do not remove the need to comply with other applicable consent and regulatory regimes. Appropriate planning, legal and technical advice should be obtained before acquiring a site or commencing development.

Development finance availability, leverage, interest rates, fees, planning requirements, drawdown conditions and security depend on the borrower, site, project and lender at the relevant time.

Planning permission, future Gross Development Value, construction costs and future refinancing or sale proceeds are not guaranteed.

Development finance may be unregulated depending on the transaction. Any property or other asset used as security may be at risk if borrowing secured against it is not repaid.