Development Finance is available for projects including residential, commercial, mixed use and student accommodation. Loans can be arranged for new build, conversions and heavy refurbishments from £100k to £50m.
The market for development finance is improving after the slump of 2008 to 2010 and with the UK Government First Buy and Help to Buy schemes fuelling demand and increasing prices so developers are seeing the market demand growing.
Property development finance:
Access to development finance is becoming slightly easier, however, there are very few meaningful 100% funding models available, especially outside of London and the South East. Existing lenders and former lenders are improving their offers and there is a return to more highly leveraged structures of the pre-crunch days.
Residential property portfolios are seeing a much-improved supply of long-term investment finance which are helping developers to retain units for investment and thus creating access to additional funding to repay the development lender when restructuring the loan on completion.
The most important thing is that there is an appetite for lending in the development arena and this is only set to increase.
Property development loans:
Just like main-stream mortgage lending there are a number of sources available for development finance. Unlike residential mortgage lending finding a suitable development loan that matches your criteria and proposal can seem like looking for a needle in a haystack.
Lenders tend to have their own specific criteria and not a "one size fits all" attitude to development finance. The high street banks have all but withdrawn from the development finance market (unless you have a proven track record, 40% of the development costs and enough capital reserves or assets to negate any risk) so it's probably not even worth talking to them.
Commercial development finance:
Therefore, the place to look for development finance is investment banks, challenger banks, specialist property funds, bridging lenders; all of whom have expanded their markets and moved into traditional high street banking space.
Talking to a commercial broker may be a way to save time and find the best deal as they should be able to give you an idea of whether your scheme is likely to attract an offer and if so, help you to secure the appropriate funding.
How much can I borrow?
The amount of lending is set on a project-by-project basis. Your experience and track record, the location of the build, type of unit and size plus the projected profitability of the scheme will all have a defining factor on how much can be borrowed.
Projects where costs are in excess of £1m can attract up to 90% lending, whereas with smaller schemes the loan to cost ratio may be less.
What experience do I need?
This really depends on the scheme you require funding for. Most lenders will only fund larger schemes to developers with a proven track record of building a similar project out in a profitable manner.
For smaller schemes however, lenders will consider applications from industry professionals without experience or inexperienced developers. These projects will however need to have a project manager or experienced contractor on board to have any chance of securing funding.
Inexperienced developers will need to have significant cash reserves and not expect to build out large schemes of over 50 units.
Finding a lender:
As already mentioned the appetite for development finance lending is on the rise but it can still prove difficult finding a lender that fits with your project, experience and needs.
Visiting a commercial broker or at least having a preliminary discussion with one will give you an idea of whether your project could attract a lender and what you need to do to move things forward.
Commercial brokers do charge a fee to help you to find the funding you require but this usually pays dividends in terms of saving time and getting you the best deal in the market.
If you have a scheme or project in mind then simply complete the form below and one of our commercial team will get in touch.