Small site development finance is specialist funding that a lender or equity partner provides to a developer building a low unit count scheme, typically an infill or conversion project below the size mainstream property development finance is built for. The mechanics are the same as on a large scheme, staged drawdowns against build progress and interest rolled up to exit, but the economics are different: minimum loan sizes, minimum equity cheques and fixed fees all bite harder when the numbers are small. This guide explains what counts as a small site, why lenders price them the way they do, and the funding routes that actually work at this scale, including where JV equity fits.
It matters because the property most developers can realistically buy and build is small. An infill plot, a garden site, a corner plot or a house to flats conversion is where a lot of Bexley development happens, and yet it is precisely the size that falls between two stools: too small for the property development finance lenders and equity funds that want £1 million or more of loan, and too big to fund from your own savings. Understanding minimum deal sizes and the specialist routes that serve smaller schemes is the difference between a fundable project and a stalled one.
What counts as a small development site
There is no official threshold, but in funding terms a small site is a scheme of roughly one to ten units where the gross development value sits below the level most lenders and funds target. Four shapes come up again and again.
Infill and backland plots
A gap between two houses, a large garden, or land behind an existing frontage. One to four units is typical, and access is usually the make-or-break question.
Corner and replacement sites
A single dwelling replaced by two or three, or an underused corner plot. Small in unit count but often strong on value per square foot in an established street.
Small conversions
A house to flats conversion, or a commercial unit converted to residential under permitted development. Lower build risk than ground-up, and often faster to complete.
Sub-£3m GDV schemes
The common thread is a gross development value under roughly £3 million, which places the deal below the size most development finance lenders and equity funds target.
Why lenders impose a minimum loan size
A development finance lender carries roughly the same fixed cost on a small loan as on a large one. The valuation, the legal due diligence, the credit assessment and the monitoring surveyor who signs off each drawdown all cost much the same whether the facility is £300,000 or £3 million. Because the lender earns its margin on the loan balance, a very small development loan simply does not generate enough interest and fee income to justify that work. This is why most mainstream lenders set a floor of around £250,000 to £500,000, and why many will tell you they would rather fund a scheme above £1 million.
The same logic drives the terms, not just the minimum. On a small facility a lender may hold loan to cost slightly lower, charge a higher percentage arrangement fee to cover its fixed cost, or set a minimum monitoring fee that looks heavy against a modest build. None of this makes a small scheme unfundable. It means you have to look past the high street development finance desks toward the specialist lenders and property development finance structures that are built for smaller loans, where the whole process is sized to match a one to ten unit project rather than a 100 unit block.
Realistic funding routes at small scale
Three funding routes carry most small schemes. The first is a refurbishment bridge, a short term loan for buying and improving an existing property where the work is light and the exit is a quick sale or refinance. Refurbishment finance in Bexley starts from around 0.49% per month, and it suits a conversion or a refurbish and add value project more than a ground up build. It is drawn quickly and is often the right tool for the smallest deals, where full development finance would be heavy handed.
The second is light development finance, a scaled down version of the staged facility used on larger sites. It funds a modest ground up scheme or a more substantial conversion, with senior debt from around 6.5% per annum on the strongest deals, released in tranches against a monitoring surveyor's valuations and repaid when the units sell. Several specialist lenders focus specifically on smaller loans and smaller developers, and a broker's job is to match your scheme to the lenders whose criteria actually fit a small site rather than the ones who quietly prefer larger work.
The third is the equity route, which comes into play when you have the site and the appraisal but not the deposit. Senior debt on a small scheme rarely exceeds 65 to 70% of cost, so on a £900,000 project you might still need £270,000 or more of your own money before fees and contingency. Where that cash is not there, a profit share partner or a JV equity structure can fund the gap, and that is where the small site question gets interesting. You can model the loan, the deposit and the profit for your own scheme before you decide which route fits.
Where JV equity fits at small scale
Joint venture equity is funding where a partner puts up the cash the senior lender will not, in return for an agreed share of the profit rather than interest. The deal is usually held in a special purpose vehicle, or SPV, with the developer and the partner as shareholders, and the profit is split once the senior debt and costs are repaid. On a large scheme this is a well trodden path. On a small site the obstacle is the minimum cheque size: many equity funds will not deploy below £500,000 to £1 million, because the legal and monitoring cost of a joint venture is similar whatever the deal size, so a small equity ticket is uneconomic for a fund in the same way a small loan is uneconomic for a bank.
That does not close the door, it changes who walks through it. On an infill scheme needing £150,000 to £300,000 of equity, the realistic partner is a private investor, a family office with an appetite for small tickets, or an experienced local developer taking a profit share. This is exactly the gap that equity funding for smaller development schemes is designed to fill, matching developers on sub-£3 million sites with capital partners who are comfortable at that scale and share the risk rather than lending against it.
The choice between equity and mezzanine finance comes down to how much deposit you can cover. Mezzanine is a second charge loan that lifts combined leverage to around 85 to 90% of cost, cutting your cash to roughly 10 to 15% in exchange for a higher blended rate, from around 12% per annum on the mezzanine slice. It works when you can fund most of the deposit yourself and only need a top up. When you cannot, JV equity that funds the whole deposit in return for a profit share is often the only structure that gets a small scheme built, which is why a profit share partner frequently beats mezzanine at this end of the market.
Rates, costs and how to apply
How much you can borrow and the rates you pay both flex with the deal. On a small scheme, property development finance rates in Bexley start from around 0.65% per month, roughly 7.8% per annum, with the exact rate driven by loan to cost, your track record as a property developer, and the lending criteria of the specific lender. To apply, you present the site, the planning permission, a costed development appraisal and your exit, and a broker matches that package to the lenders whose small-loan criteria and term actually fit a small property development. Most facilities run for a term of 12 to 18 months, released in tranches, with interest rolled up rather than paid monthly.
The costs involved go beyond the headline rate. Budget for an arrangement fee of 1 to 2% of the loan, valuation and legal fees, a monitoring surveyor fee at each drawdown, and sometimes an exit fee. The lender takes a first charge over the property as security, and on a small scheme may look for a personal guarantee too. Good service matters more than it sounds: a lender or broker who keeps a small customer informed and releases each tranche on time is worth more than a marginally cheaper rate that stalls the build. A responsive broker is what turns a small property finance application into a funded, drawn loan. We handle the additional legwork of comparing lender criteria and rates so a small customer gets the same service larger property developers take for granted.
Small schemes also open a wider pool of capital than large ones. Private investors and property investors who would never look at a 100 unit block will happily back a two or three unit infill scheme they can understand, and a family office can treat a small residential or commercial to residential project as a business line rather than a one-off. Whether you are building new homes, converting a commercial building or improving an existing property, the funding market for small property development is deeper than most first-time developers expect. Note that arranging development finance is not a regulated mortgage activity, so these facilities sit outside Financial Conduct Authority consumer protections and are assessed on the property and the project, not a personal income.
Planning quirks of infill and backland schemes
Small sites carry planning risks that larger, cleaner sites do not, and lenders know it. Overlooking and loss of privacy are the most common objections on an infill or backland plot, because you are building close to existing homes. Access is the next: a backland plot with no road frontage needs a viable route in, and a right of way dispute can sink a scheme after finance is agreed. Daylight, parking and the character of the street all weigh more heavily on a tight urban plot than on an open site. Bexley's planning approval rate of 80% is encouraging, but a well prepared application with these issues addressed is what turns that headline rate into a consent for your specific site.
Then there is the levy question. The Community Infrastructure Levy, or CIL, is charged on new floorspace and can apply even to a small net gain of one or two units, so it belongs in the appraisal from the start. There is a self-build exemption for a home you will build and live in yourself, and relief for some small developments, but these must be applied for and granted before you commence on site or the exemption is lost, an expensive trap on a small scheme. Section 106 obligations are less common on very small developments but can still bite. A missed CIL charge or an overlooked planning permission condition can turn a thin small-site margin negative, so price both in before you buy the land.
A worked small-scheme example
Take a Bexley infill plot with consent for a pair of three bedroom houses totalling 2,000 square feet. At the borough average of £370 per square foot that is a gross development value of around £740,000. Land and build together might come to £560,000 with fees, professional costs and a contingency on top, leaving a profit before finance of roughly £150,000 to £180,000 if the numbers hold. A lender assessing this deal looks at the site, the planning permission, the development appraisal and GDV, your credit history and the exit strategy, and prices the loan against all of them.
Suppose senior debt covers 65% of the £560,000 cost, about £364,000, drawn in tranches as the build progresses. That leaves a deposit of nearly £200,000 plus fees to find. A developer with the cash funds it and keeps the profit. A developer without it brings in a profit share partner who provides the deposit for an agreed slice of the £150,000-plus upside, or adds a small mezzanine loan to cut the cash needed. Interest on the senior debt rolls up across the 14 month build rather than being paid monthly, so the appraisal must carry the full finance cost to the exit.
Plan the exit before you draw the first pound. Most small schemes exit by selling the completed units on the open market, and Bexley values support that with a value-tier price point and steady residential property buyer demand. Where sales are slower than expected, development exit finance, a lower cost bridge against completed and unsold units from around 0.55% per month, buys time to sell without the original development loan expiring. Alternatively you can refinance the finished homes onto a buy-to-let mortgage and hold them, supported by the borough's 4.8% average rental yield. A credible exit, evidenced with real local comparables, is what makes the whole small-site funding package fundable in the first place.
The Bexley picture for small sites
Bexley is a workable borough for a small scheme. Values are modest enough to keep absolute costs down, the planning approval rate is healthy, and the pipeline is full of the infill plots and conversions that suit small property development projects.
Average value
£370 psf
Typical residential values across the London Borough of Bexley, a value-tier market where small schemes can work on modest absolute costs.
Planning approval rate
80%
Most residential applications in the borough are approved, which supports the fundable appraisal a lender or equity partner wants to see on an infill scheme.
Average build timeline
14 months
A realistic programme for a small Bexley scheme. Interest rolls up across the term, so your appraisal must carry the finance cost for the whole build.
Active development sites
28
A steady pipeline of live schemes across the borough, many of them the infill plots and conversions that suit a small first or second project.
Areas such as Bexleyheath, Sidcup, Erith and Crayford throw up the infill plots, garden sites and small conversions where the numbers on a modest scheme can work. With conservation coverage across the borough at only 12%, most small residential and commercial sites sit outside heritage constraints, which keeps the planning and build simpler. Match the ambition of the scheme to the funding you can realistically raise, size the deal to the lenders and partners who actually operate at small scale, and Bexley is a borough where a one to ten unit project stands a genuine chance of getting funded and built.
Explore Your Funding Options
Development Finance
The staged senior loan behind most small ground up and conversion schemes in Bexley.
Learn moreDevelopment Equity
Profit share and JV equity partners who fund the deposit a small scheme cannot cover from cash.
Learn moreTalk to a Broker
Tell us about your small site and we will tell you which funding route is realistic and what it will cost.
Get in touchSmall Site Development Finance FAQ
The questions developers ask most about funding a smaller scheme.
Data sources: HM Land Registry Price Paid Data 2025 (values); Bexley Council Planning Statistics 2024/25 (planning approval rate and conservation coverage); ONS Mid-Year Population Estimates 2024; Bexley Development Finance market data 2026 (build timeline, active sites and rental yield). Figures are typical ranges for illustration and not a quote or an offer of finance.