Land development loans
Quick answer
A land development loan finances acquiring and improving raw land — grading, utilities, roads, and entitlements — to ready it for construction. It's an earlier, riskier stage than a building loan, so down payments run higher (often 25–40%) and experience matters more.
The exit is usually selling improved lots to builders or rolling into a construction loan to build yourself.
Land development is where the biggest margins and the biggest risks live in real estate.
You're turning dirt into something buildable, and there's no income or finished structure to reassure a lender along the way. That makes these loans the hardest to get in the commercial stack.
Key takeaways
- → Land development funds acquisition plus improvements — grading, utilities, roads, entitlements.
- → It's riskier than building loans, so expect 25–40% down and tighter terms.
- → Experience and a defined development plan are close to essential.
- → The exit is selling improved lots or rolling into a construction loan.
What land development loans cover
These loans fund buying the land and the horizontal work that makes it buildable — clearing, grading, drainage, utilities, roads, and securing entitlements.
Once the land is developed, vertical construction is a separate ground-up loan, or you sell the improved lots.
Why they're harder to get
Undeveloped land is weak collateral — illiquid, with no income. Lenders offset that with larger down payments and a hard look at your track record.
A clear, credible development plan with realistic costs and timelines is what separates fundable projects from passes. The commercial overview explains how lenders weigh sponsors.
Define the exit early
Lenders want to know how the loan gets repaid before they fund it. Selling improved lots to builders is the cleanest exit; building on the land yourself rolls into construction financing.
A bridge loan can carry the project between the development and construction stages if timing requires it.
Best lenders for land development
Best lenders for land development
Best Overall — Same-Day Funding Across Six Loan Types Ad
Best Line of Credit for Cash Flow
Best Invoice Factoring for Contractors
For broader project and business funding, eBoost Partners offers bridge construction financing to connect the stages of a development.
Related guides
Commercial construction overview
How commercial financing works.
Ground-up construction loans
Build once the land is ready.
Multifamily construction loans
Apartment and multifamily builds.
Commercial construction loan rates
What development financing costs.
Bridge loans
Bridge between stages.
Construction loan rates
Compare costs by product.