Funding the Gateway 2 Gap; Why Smart Structuring Matters

The Gateway process introduced under the Building Safety Act has reshaped development timelines for UK residential schemes, with Gateway 2 in particular proving a costly and complex pressure point.

The three Gateways: at planning, pre-construction and final completion, were established post-Grenfell to embed building safety into every stage of delivery. Of these, Gateway 2 is the most significant hurdle, preventing work from commencing until detailed control, design and safety documentation are approved for buildings over 18 metres or seven storeys.

While supported in principle, Gateway 2 has introduced longer lead times, higher upfront costs and additional financial pressure. Delays mean developers are carrying land for longer, absorbing rising interest costs and facing uncertainty in contractor scheduling and pricing. Anecdotal evidence across the sector suggests pre-construction programmes are now extended by months, particularly on high-rise and complex schemes.

As of 31 March 2025, BSR data showed a median determination time of 25.1 weeks, with rejection rates of 50% for existing building applications and 45% for new-builds.

Funding challenges

Gateway 2 funding diverges sharply from standard planning. Traditional development finance assumes staged drawdowns once construction begins, but Gateway 2 requires significant outlay before works can start. This creates a funding gap between planning and mobilisation, demanding lenders willing to fund a stage with no immediate construction security. The result is a need for deal structures that support extended pre-construction periods, match lender appetite and protect developer cashflow.

For lenders, the issue is not appetite but risk management. Applications are scrutinised for evidence that documentation will satisfy the regulator first time, and for borrower liquidity to service interest through longer pre-construction periods. Clarity on the exit route is essential, with well-structured paths into development or long-term facilities often the deciding factor. Developers demonstrating experienced teams, realistic timelines and contingencies for regulatory feedback are securing more competitive terms.

Funding solutions

At Karis Capital, we are working with developers of all sizes across the UK to secure funding for Gateway 2 costs – either as standalone facilities or structured to flow seamlessly into the main development loan once approvals are achieved.

Recent mandates illustrate this shift in practice. These include supporting a Liverpool-based developer through Gateway 2 for a significant residential scheme now expected to commence in Q4, and arranging a facility in Milton Keynes designed to transition directly into the build phase, with a lender providing a single funding package covering both Gateway 2 and construction costs. This approach reduces complexity and avoids the need for refinancing between stages.

In the North, one developer having recently achieved planning is using a £600k bridge loan secured against the uplifted land value to fund their Gateway 2 process. The uncertainty remains, however, as to whether this facility will be sufficient, and how long it will need to be in place, before moving onto a development product to commence the build phase.

These examples highlight a broader trend: Gateway 2 is now a financeable stage in its own right, requiring bespoke structuring rather than retrofitted solutions.

How can we help?

As with any specialist funding requirement, the key lies in structuring transactions that meet the scrutiny of increasingly cautious lenders, many of whom are still developing their approach to the Gateway process. By aligning projects with funders experienced in, or with a genuine understanding of, this space and ensuring the application is supported by the right professional teams, developers can mitigate delays and control costs during this critical stage.

Karis Capital brings together specialist lenders who understand the Gateway 2 process alongside valuers, lawyers and other key professionals with expertise in these requirements, ensuring that transactions are structured and executed in a way that supports both the successful completion of Gateway 2 and the delivery of the scheme itself.