The loan is available for projects with build costs between £500,000 and £1.5m.
Octopus said that it is designed for cases which require more technical support than a typical refurbishment but which are shorter term and less risky than a normal development project.
Gavin Eustace, head of development at Octopus Property, said the lender believes this loan will fill a gap in the market.
He added: “With wider macro uncertainty affecting the sector, smaller developers are increasingly looking at ways to re-position existing properties to realise value or embark on smaller ground-up schemes which require a new type of funding to match the risk profile of the project.”
To date, Octopus has approved nine such loans, worth a total of £10m, including the conversion of an office in Leytonstone, north London, into 10 apartments.