Running short of cash during a building project is more common than many people realise. Even with careful planning, unexpected costs can arise. You might face higher material prices, weather delays, design changes, or labour shortages that push your budget beyond the original plan.
According to a UK construction report, around 60% of building projects experience some form of cost overrun, while 40% of small developers face cash flow issues at least once during a project.
Perhaps you have started with a bridging loan to pay for your renovations or development finance, but have come into extra costs. No matter how hard we try to prepare, we can often find ourselves with unexpected costs and issues with a property build.
These problems often mean you need to find extra funds to complete the build, pay contractors, or cover materials before the project is finished. In these moments, it’s essential to explore the different finance options available, depending on your circumstances and how close the project is to completion.
What are your options if you need to top up your building project?
There are several ways to boost your cash flow and keep your building project on track. These include:
- personal loans
- mezzanine finance
- investor funding
- credit cards
- second or third mortgage
Each option has its benefits and risks, so it’s important to understand them clearly before deciding.
Compare top-up finance options
| Type of Finance | What It Is | Typical Amount You Can Borrow | Typical Interest Rate Range |
| Personal Loan | Unsecured loan repaid monthly over 1–5 years | £1,000 – £25,000 | 6% – 15% |
| Mezzanine Finance | Secondary funding sitting behind the main loan | £50,000 – £2,000,000+ | 10% – 25% |
| Investor Funding | Private or institutional investment for a share of profits | £10,000 – £1,000,000+ | Profit-based or negotiated |
| Credit Cards | Short-term revolving credit for small expenses | Up to £10,000 (limit dependent) | 20% – 35% |
| Second Mortgage | Secured loan against property equity | £10,000 – £500,000+ | 4% – 9% |
| Third Mortgage | Additional secured loan on property with existing mortgages | £20,000 – £300,000+ | 10% – 20% |
What is a personal loan and how can it help?
A personal loan can be a straightforward solution if you need a smaller amount to cover short-term costs. It does not usually require collateral, which makes it easier and quicker to obtain than a mortgage or business loan. Most personal loans are repaid over one to five years with fixed monthly payments, giving you predictability in managing your budget. (Source: Salad)
However, personal loans often have limits on how much you can borrow, typically up to £25,000, and interest rates can vary depending on your credit score. They are most useful for smaller cost overruns or unexpected expenses that need quick payment.
What is mezzanine finance and when is it used?
Mezzanine finance is a specialist type of funding often used in property development. It sits between a senior debt (like a mortgage) and your own investment, acting as a top-up when your main loan does not cover all project costs. Lenders provide funds in exchange for higher interest rates or sometimes a share in the project’s profits.
This type of finance is useful when the project is close to completion but extra capital is required to finish it. It can be arranged relatively quickly, but the cost is higher than standard loans, so it’s important to calculate whether the potential return on your project justifies the expense.
Can speaking to investors help you complete your project?
If your building project shows good potential for profit, attracting private investors can be a smart option. Investors may be individuals, firms, or property funds willing to put money into your project in exchange for a percentage of the profit or ownership.
This approach works well if you have a solid business plan and clear timelines for completion. Investors can provide large sums of money, sometimes without the strict repayment schedules of traditional lenders. However, you may have to share control or profits, which can be a trade-off worth considering for the sake of completing your project.
Should you use credit cards for construction expenses?
Credit cards can be a fast way to pay for smaller costs such as materials, equipment hire, or fees, especially if your cash flow problem is short term. Some builders use business credit cards to manage spending and benefit from interest-free periods.
However, relying too heavily on credit cards can become risky. Interest rates are usually high—often above 20%—and if payments are missed, debt can grow quickly. It is best to use this option only for temporary gaps and ensure repayment as soon as possible.
How can a second or third mortgage help fund your project?
A second mortgage, also known as a secured loan, allows you to borrow against the value of a property you already own. This can provide a larger amount of money than a personal loan, making it suitable for bigger projects. The interest rate is often lower because the loan is secured by property, but the risk is higher since your home or building could be at stake if repayments are missed.
In some cases, if you already have a second mortgage, you may consider a third mortgage, though this is much rarer and usually comes with strict conditions and higher rates. It is often used by experienced developers who are confident in the project’s profitability and have clear repayment plans once the property is sold or refinanced.
See also second charge loans.
What is the best option for your situation?
The best choice depends on how much funding you need, how quickly you can repay it, and the level of risk you are willing to take. For smaller shortfalls, a personal loan or credit card may be enough. For larger projects, mezzanine finance or investor funding can provide the capital needed to finish the build.
Always calculate your project’s potential return and repayment capacity before committing. Keeping communication open with lenders, investors, and contractors can also prevent future cash flow problems. With the right approach and planning, you can stabilise your finances, complete your project, and still achieve a successful outcome.
