Development Finance Term Sheet: From Terms to Drawdown
A term sheet lands within 48 hours. First drawdown can be weeks away. This guide reads a development finance term sheet line by line, explains how it differs from a credit-approved offer, and maps the real timeline from indicative terms to the day the money starts moving.
Updated July 2026 · 8 min read
A development finance term sheet is a short document in which a lender sets out the indicative terms on which it is willing to fund a property development, before that offer is formally credit approved. It names the facility size, the rate, the fees, the security and the conditions that must be satisfied before you can draw the first pound. Getting one is a milestone, but it is the start of the funding process, not the end of it.
Most developers read the headline loan amount and the rate, sign, and then feel the calendar stretch out in front of them while valuations, legals and conditions precedent grind through. The gap between a signed term sheet and first drawdown is where deals slow down, get re-priced, or quietly die. Understanding what each line of the term sheet commits you to, and what still has to happen after you sign, is what lets you draw down on programme rather than watching your completion date drift.
What a term sheet actually is
A term sheet, sometimes called heads of terms, is the lender's statement of intent. It says: on these numbers, with this security, subject to our due diligence and credit committee, we will lend. It is deliberately indicative. No valuation has been done, the quantity surveyor has not reviewed your costs, and no lawyer has looked at title. The term sheet exists so that both sides can commit to those costs with a shared understanding of the deal.
That indicative status matters. A term sheet is subject to credit committee, which means the people who issued it are not yet the people who have signed off the money. It is also subject to valuation and to the conditions precedent it lists. Treat it as a well-informed offer to proceed rather than a guarantee of funds, and you will read the rest of it more carefully.
Decoding the key lines
The clauses that decide what a development finance term sheet really costs you, and where the risk sits.
| Term sheet line | What it means |
|---|---|
| Facility size | The maximum the lender will advance across the whole build. It is a ceiling, not a cheque: you only pay interest on funds actually drawn. |
| LTGDV and LTC | Loan to gross development value and loan to cost. The lower of the two caps your senior debt, so a strong GDV does not help if your costs push loan to cost past the limit. |
| Rate and how interest accrues | The margin, and whether interest is retained, rolled up, or serviced monthly. Most development finance rolls interest up to exit, compounding on the drawn balance rather than the full facility. |
| Fees | Arrangement fee (typically 1-2% of the facility), exit fee, valuation, monitoring surveyor and lender legal costs. These sit on top of the rate and belong in your appraisal from day one. |
| Security and charges | A first legal charge over the site for the senior lender, with any mezzanine finance or equity layer ranking behind it on a second charge, governed by an intercreditor agreement that sets out who gets repaid first. |
| Conditions precedent | The list of items that must be satisfied before first drawdown: a satisfactory valuation, QS report, planning permission confirmed, searches, and the special purpose vehicle (SPV) in place. This section is where most of the calendar time goes. |
| Personal guarantees | What the individuals behind the borrowing SPV stand behind. Usually interest, cost overruns and a shortfall on a distressed sale rather than the whole loan, though a thin track record widens it. |
| Cost overrun clause | Who funds an overspend. Most term sheets oblige the borrower to top up the equity if costs exceed the appraisal, which is why a realistic contingency matters before you sign. |
Term sheet vs credit-approved offer
The single most useful distinction to hold in your head is the one between a term sheet and a credit-approved facility. The term sheet is the invitation to proceed. The credit-approved offer is the facility the lender has actually agreed to fund once its valuation, the QS report and the legal work are complete. Between the two sits credit committee, the internal decision that turns willingness into a commitment.
This is why a signed term sheet is not the moment to exchange on an unconditional site purchase. The numbers can still move: a valuation can come in low, a QS can re-price the build, and the loan to cost or loan to GDV cap can tighten as a result. Experienced developers treat the term sheet as the point at which they commit to diligence costs, and the credit-approved offer as the point at which they commit the scheme.
The timeline nobody explains: terms to drawdown
On a straightforward scheme, plan for three to six weeks between a signed term sheet and first drawdown. Here is where that time goes.
Enquiry and appraisal
You submit the scheme: site, planning status, development appraisal, build cost, professional team and exit. A broker sanity-checks the numbers before anything goes to a lender.
Indicative term sheet issued
The lender issues indicative terms. This is not an offer of finance, it is a statement of the terms on which the lender is willing to proceed, subject to due diligence and credit committee.
Valuation, QS and legals
A RICS red book valuation, an independent quantity surveyor review of costs and programme, solicitor due diligence and property searches all run in parallel. Slow instructions here are the single biggest cause of delay.
Credit approval and CP satisfaction
Credit committee turns the term sheet into a credit-approved facility, and the conditions precedent are cleared one by one. The SPV must be set up, the guarantees signed and the searches returned clean.
First drawdown
The day one advance is released, usually against the land, and the facility is live. From here, funds are drawn in tranches against QS-certified progress until practical completion.
You can model the loan, the interest roll-up and the equity you need across that timeline with our development finance calculator before you commit to a scheme.
Where deals die between terms and drawdown
Most collapsed deals fail in the same handful of ways. All of them are avoidable with preparation.
A valuation below the appraisal
If the red book GDV comes in under your figure, the loan to GDV cap bites and the facility shrinks. A defensible GDV backed by real Lambeth comparables protects you here.
Costs that fail the QS review
The monitoring surveyor re-prices your build. An optimistic cost plan gets marked up, thinning the profit on cost, pushing loan to cost past the limit and forcing more equity into the deal.
Conditions precedent left too late
The SPV not incorporated, guarantees unsigned, or searches not ordered. None of these are hard, but leaving them until the end adds weeks between a credit-approved offer and first drawdown.
A change in the scheme
A planning amendment, a new contractor, or a revised unit mix after terms are issued can send the deal back to credit committee. Lock the scheme down before you sign.
How a JV equity term sheet differs
A term sheet from a joint venture equity partner reads differently from a loan offer, because the partner is buying a share of the scheme rather than lending against it. It sits at the top of the capital stack, behind the senior debt and any mezzanine finance, which is why it carries the most risk and the largest share of the upside. Instead of a rate and a loan to cost limit, the headline terms are a profit split, the point at which that split kicks in, and how control is shared inside the SPV. There is usually no monthly interest. In its place sits a preferred return, a priority slice of profit the equity partner takes before the split is applied, followed by the profit share itself. Some partners take this as preferred equity, a fixed return ranking ahead of the ordinary profit share.
The obligations also run both ways. A loan term sheet obliges you to draw down and service the facility; a JV equity term sheet commits the partner to fund their share on an agreed schedule too, so the drawdown mechanism protects the developer as well as the funder. Control terms matter more than they do on a senior loan: who signs off cost overruns, who can change the professional team, and what happens if the scheme runs late are all negotiated on the term sheet rather than left to a standard facility agreement. If you are weighing a profit share against a straight loan, it is worth understanding how JV equity term sheets differ from loan offers before you sign either one.
For developers who cannot fund the full equity a senior term sheet demands, this is where our equity finance and JV structures come in, funding the gap the senior lender leaves in return for a share of the profit rather than a personal guarantee.
Preparing so you draw down fast
Almost every delay between a term sheet and first drawdown is self-inflicted, and almost all of it can be front-loaded. Have the SPV incorporated and its bank account open before terms are issued. Have the development appraisal, the priced build cost, the planning consent and the professional team documented and ready to send. The faster the valuer, the quantity surveyor and the solicitors can be instructed, the faster the conditions precedent clear.
Read the conditions precedent the day the term sheet arrives and start clearing them immediately rather than waiting for credit approval. Order the searches, brief your solicitor, and confirm the guarantors are ready to sign. On a well-prepared Lambeth scheme, this is the difference between drawing down in three weeks and drawing down in six. When you are ready to test a real deal against live terms, talk to our team and we will tell you what a lender will actually put on a term sheet.
The Lambeth picture behind the term sheet
A lender prices a Lambeth term sheet against the local market a valuer will report on. These are the figures that shape the numbers on the page.
£620per sqft
Average value
Underpins the GDV a valuer will support, and therefore the loan to GDV cap on your term sheet.
73%approved
Planning approval rate
A healthy approval rate reassures lenders on planning risk when they set the conditions precedent.
16months
Average build timeline
Interest rolls up across the full term, so the programme drives the finance cost in your appraisal.
58sites
Active development sites
A steady pipeline of live schemes gives lenders comparable evidence when they underwrite your deal.
Explore your funding options
Development Finance
The senior facility behind most Lambeth schemes, up to 70% loan to cost with staged drawdowns.
Learn moreEquity Finance
JV equity partners who fund the gap the senior loan leaves, up to 100% of cost for a profit share.
Learn moreFinance Calculator
Model the loan, the rolled-up interest and the equity you need before you sign a term sheet.
Learn moreDevelopment finance term sheet FAQs
The questions developers ask most before they sign.
A term sheet is a short document in which a lender sets out the main terms on which it is prepared to lend: the facility size, the rate, the fees, the security, the guarantees and the conditions that must be met before money is released. In development finance it is issued early, usually within 24 to 48 hours of a complete enquiry, and it is indicative rather than binding. It gives both sides a clear basis to commit to valuation, legal and quantity surveyor costs before the deal is formally credit approved.
A complete development finance term sheet sets out the facility size, the loan to cost and loan to GDV limits, the interest rate and how interest accrues, all fees (arrangement, exit, valuation, monitoring and legal), the term, the security and personal guarantees, the drawdown mechanism, and the conditions precedent to first drawdown. It should also state the exit route the lender is underwriting and any cost overrun obligations. If a term sheet is vague on fees or conditions precedent, that is where the surprises tend to appear later.
No. An indicative term sheet states the terms a lender is willing to proceed on, subject to due diligence and credit committee approval. A credit-approved offer is the facility the lender has actually agreed to fund after valuation, the QS report and legal work are complete. The gap between the two is where a deal can still change, or fall away, so a signed term sheet is the start of the process rather than the finish.
On a straightforward Lambeth scheme, three to six weeks is realistic from a signed term sheet to first drawdown. The valuation, quantity surveyor review and legal due diligence run in parallel and account for most of the time, and the conditions precedent are cleared alongside them. Deals move faster when the SPV, appraisal and professional team are ready before terms are issued, and slower where planning or valuation questions arise.
Senior development finance in Lambeth typically funds up to 70% of total cost, so on a straight facility you would fund the remaining 30% or so as equity, plus fees and a contingency. A stretch senior facility can reach 80% in one loan, mezzanine finance can lift combined leverage to around 90% of cost, and a JV equity structure can take the deposit close to zero in exchange for a share of profit rather than interest.
Data sources: HM Land Registry Price Paid Data 2025 (values); Lambeth Council Planning Annual Report 2024/25 (planning approval rate); Lambeth Development Finance market data 2026 (build timeline and active sites). Figures are typical ranges for illustration and not a quote or an offer of finance.
Get a development finance term sheet for your Lambeth scheme
Send us the scheme and we will come back with indicative terms within 24 hours, and tell you exactly what has to happen to reach first drawdown.