Development Finance
- Funding up to 100% build costs
- Funding up to 70% of land purchase
- Funding up to 70%-75% Loan to Gross Development Value
- Borrowing from £100,000 – £100,000,000 or more
- Terms typically 12-24 months or longer
- New Builds, conversions and heavy or light refurbishment
- All levels of experience
- All areas of UK covered
- Loan availability, loan terms, lender fees and rates will vary depending on financials and background
- Business purposes only
What we do
We source development finance for both new and established property developers. This is our area of expertise and we are well equipped to meet a variety of development finance needs. We are always happy to provide a free consultation and would be delighted to support you every step of the way with your development projects.
Development Finance FAQs
What is development finance?
Development finance is funding for property development projects where works are going to be carried out. Development finance is typically associated with ground-up developments but it can also be appropriate for refurbishment and conversion property projects where funding is required towards the build works.
What type of projects can development finance be used for?
• Ground-up build of an entirely new building;
• Adding additional floors or extensions to existing buildings;
• Basement excavations;
• Extensive reconfiguration such as a commercial to residential conversion;
• Refurbishing a single property.
How is development finance structured?
Development finance is 1 loan with 2 parts that typically includes 1) some funding towards the existing property value and 2) 100% funding towards the build costs, which is released in tranches called ‘drawdowns’ during the build phase.
What fees do development finance lenders charge?
Development finance lenders typically charge an arrangement fee, monthly interest and an exit fee, with the entire loan and the exit fee being repayable at the end of a pre-agreed loan term. Interest can sometimes be paid monthly but is more often included in the loan to be repaid. If your properties sell quicker than expected, then development finance generally allows for an earlier repayment without early repayment charges.
How much can I borrow using development finance?
Development finance lenders use a range of criteria to calculate loan size and structure, with each deal being assessed individually on its attributes. Typically, they will look to fund 100% of build costs and professional fees and up to 70% Loan to Value (LTV) of the existing property value.
Can I borrow more with mezzanine finance?
In some cases, with the use of a mezzanine finance lender (a second lender that ranks behind the development finance lender) it is possible to borrow up to 90% of total costs. However, this is often only plausible for extremely strong deals, for example, an experienced borrower, who has a strong asset position and a high profit desirable project.
How will a development finance lender assess my project?
Some of the key items they look at are:
• Planning permission – a lender will want to see that any required permission is in place and that the relevant conditions are met. If you don’t have planning permission, bridging finance might be more suitable.
• Location of the project – lenders have difference appetites for different locations.
• Calculated profits - typically requiring a minimum of 20% profit on costs.
• Gross Development Value – what will the completed properties be worth?
• Demand for the planned properties in the location.
• Borrower’s experience, background and asset position.
• The strength and experience of the professional team behind the development, for example, building contractor, architect and project manager.