Borrowers often arrive with a financing requirement already labelled in their own mind. Sometimes the label is right. Just as often, the brief describes one product when the transaction actually calls for the other. Because the two are underwritten, priced and structured differently, getting the distinction right at the outset is one of the most useful things a borrower can do before approaching the market.

The Core Distinction

A bridge loan is a short-term, asset-backed facility, typically 3 to 24 months, drawn in a single advance against an asset that already exists. It is used to acquire under time pressure, to release equity ahead of a sale, to refinance maturing debt, or to fund a transitional business plan.

Development finance funds the creation of value rather than the holding of it. It pays for ground-up construction, conversion or substantial refurbishment over 18 to 36 months, drawn in tranches against a monitoring surveyor's certification, and sized on loan-to-cost and loan-to-gross-development-value rather than a single day-one valuation.

The simplest test: if the work that drives the return is mostly physical and yet to happen, you are in development finance territory. If the asset is broadly in its end state and the requirement is about timing, liquidity or capital structure, a bridge is usually the right tool.

When a Bridge Is the Right Tool

Bridge facilities suit situations where the asset is already lettable, saleable or habitable, and the borrower needs speed or flexibility rather than construction funding.

Acquisition under time pressure. A competitive prime asset where certainty and speed of execution win the deal. In core jurisdictions a straightforward bridge can reach drawdown in roughly four to eight weeks from a complete information pack.

Equity release. Unlocking capital from an unencumbered or lightly geared asset to fund another opportunity, without forcing a sale.

Refinancing maturing debt. Replacing an expiring facility while a longer-term solution or a sale is arranged.

Bridge facilities are indicatively priced between 8% and 12% per annum, with leverage up to around 70% of value on a senior basis.

When Development Finance Is the Right Tool

Development finance suits projects where the value is created through construction or significant works, and funding needs to be released progressively as that value is built.

It is sized and monitored differently. Drawdowns are tied to a surveyor's view of cost incurred and works completed, and lenders underwrite the contractor, the appraisal and the developer's track record as closely as the site itself. Facilities are indicatively priced between 8% and 11% per annum, with leverage up to around 60% of gross development value.

The Grey Area: Heavy Refurbishment

The hardest cases to label sit in between. A heavy refurbishment or a conversion can be funded as a stretched bridge or as a development facility depending on the scale of works, the drawdown profile and the lender's view of the risk.

This is precisely where structuring matters most. The same project presented as a bridge will reach a different lender pool, at different terms, than the same project presented as development finance. The right framing is not a presentational choice; it determines who will lend and on what basis.

Why the Label Matters for Pricing and Leverage

Lenders specialise. A specialist bridging lender and a development funder are often different counterparties with different credit committees, different monitoring requirements and different cost of capital. Approaching the wrong pool with the wrong label wastes time and frequently produces worse terms.

Choosing the product correctly, and structuring the requirement around it before going to market, is the difference between a facility that is shopped and one that is matched.

Our Approach

At Passy Partners we treat this as the first question on every mandate, before any lender is approached. Our role is to understand the asset, the works, the timeline and the exit, then frame the requirement so that it reaches the lenders genuinely placed to deliver it.

If you are unsure which product your transaction calls for, we would welcome the conversation before you approach lenders directly.