A Land Loan is a form of senior debt used to fund the acquisition of a site prior to planning consent or construction activity. In the UK property development finance market, land loans are typically secured with a first legal charge and carry slightly higher risk than loans backed by planning or build-out progress. They may be structured with interest roll-up and shorter terms. These loans are crucial for developers securing opportunities in competitive land markets, offering a bridge between acquisition and later-stage funding such as planning or development finance.
Within the capital stack, a Land Loan typically sits in the Senior Debt 1st Charge position, giving the lender priority over the asset while reflecting the higher risk profile of pre-consented land. It is often compared with a Development Loan, although the absence of planning or build progress means underwriting is more heavily weighted towards site fundamentals and exit clarity. Security is usually formalised through a Legal Charge, and lenders will closely scrutinise the borrower’s Equity Contribution to ensure sufficient alignment and downside protection during the holding period.
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