Property development finance can sometimes prove tricky to get through the usual high street lenders. However the market is opening up with new property development finance lenders emerging and filling the hole left by the usual suspects. Knowing which lenders will be best for you and who will lend on your project, is where property development mortgage brokers like us can really help. Read on to find out more.
Property development finance is growing!
The growth of alternative lenders and the increasing appetite to lend is great news for property developers. As mortgage brokers who also specialise in development finance, we have more tools than ever before. We can now find solutions for our clients who have usually been turned down by a high street lender. Of course it wasn’t that long ago when mortgage brokers were all struggling to find solutions for their clients. However times are increasingly changing and as a property professional we are finding some fantastic solutions for our clients.
New property development finance options:
Property development loans are seeing some interesting changes, particularly as some of the banks are not always keen on this sector. As a result there have been some new entries into this market place which has allowed property developers to secure finance and move forward with their businesses.
As new lenders come into the market, they are looking to offer a competitive advantage. So this might mean lower fees, higher LTV’s, and a more flexible approach to lending. However some of these new lenders are not only banks but also private financiers and private lenders! This is all completely fine, provided due diligence and knoweledge of who they are is underatken.
Like any partnership that you choose to get involved with, you should think carefully about it. You’re not going to team up with someone who is going to let you down or mess you around. So when you are looking to get development finance, you should be thinking exactly the same.
If finance is required for a development project, then getting the funding is a critical element for any successful project whether it’s big or small. In much the same way that you might outsource aspects of the development to contractors, planners, architects or whoever. You should also outsource the hunt for the right lender by using a property development mortgage broker.
Is it possible to get 100% property development finance?
This is often asked in many of the property development forums. The short answer is yes, but it also depends! If you want to secure 100% finance for a development then the only way this will happen is by either offering other security for a lender to cross charge against multiple assets or find a JV (joint venture) partner who might also be the lender or indeed an individual. But look closely at the terms of any deal as it’s easy to tie yourself into something which you later regret. Remember there is a reason they are goiving you 100% funding!
What is cross charging?
Cross charging simply means a lender not only lends against the development you need finance for, but also lends and releases funds on other assets you may own. They will have a legal charge on multiple assets you own.
For example you may have a barn that you want to convert. You might secure 70% borrowing on this, but if you own other assets, then potentially you could secure the remaining 30% that you require. The different assets you own will have to be on separate legal title for a lender to offer a cross charging option as each asset will be individually valued and assessed.
JV options for property development finance:
As development finance mortgage brokers, we have connections with the high street banks, challenger banks and smaller lenders. In addition we also have a network of individuals and firms who are looking to finance 100% of any development projects as a JV (joint venture) between themselves and the developer.
If you have a good track record, have planning permission in place and the project is appealing, then there are always JV partners who will be willing to finance 100% of the development project. Click To Tweet
Don’t expect something for nothing, the JV partner will want to share the profits. But if they are funding the project, that’s to be expected.
The terms of the partnership will have to be closely assessed and like anything you will have to be happy to go into business with someone else, as essentially that’s exactly what you will be doing.
The JV option to secure 100% development finance is a great way to share the risk and it means the developer doesn’t have to worry about the finance, but instead allows them to focus on the job in hand.
Expertise for property development finance:
As mortgage brokers with development finance expertise, we are arranging lots of funding for property developments. Using a team like us will really help you move forward with your plans and enable you to focus on the business as opposed to fighting with banks and wasting a lot of time, hassle and frustration.
There is no one size fits all, so your particular situation may look very different or need an alternative solution. That’s not to say a mainstream solution wouldn’t also work. As professionals in our industry we will look at all the options available to you and try and think outside the box to help you.
The key point to remember is that, yes you can speak to a bank direct, you might have a relationship with a lender already, but you are only getting one angle, the banks! Remember we have the inside scoop! We know all the lenders lending criteria, their appetite to lend, their systems and procedures. So just because a certain lender was the flavour of the month once, doesn’t mean they are still any good!. This last point is so important…
Working with an adviser who has their finger on the pulse of the market, will only help you. Remember you’re one perspective, one relationship, one experience, with one lender…is just one angle. We are working with lots of lenders all the time and see things from the insider perspective of who is good, who is dropping the ball, or who will best help a client. A commercial development finance broker doesn’t care who the lender is, they are just interested in getting you a good deal to help with your project, the next one and the next one, and so on.
The problem with the high street lenders for property development finance.
High street lenders often have much tougher requirements to fulfill, lower borrowing limits, less flexibility and often a desire to manage all aspects of your business banking. For some this usually requires you to switch your business banking to them.
Of course high street lenders do sometimes have more competitive rates, but the reality means that they only want the cream of the crop. For most this means that it is very hard to get a high street lender to agree a development finance deal.
Where High Street lenders struggle to get deals through their credit officials in head office, the advantage of working with a broker is that they have access to lenders who will lend in the current market. Of course that’s not to say a broker can’t still try and use the high street lenders, we do try, we are just not limited to the high street.
A good commercial mortgage broker will have a wide range of contacts and access to lenders that can turn deals around incredibly quickly. This is particularly helpful for those business people who need property development finance quickly.
The advantage of a strong asset position for property development finance:
If you have some security, assets or available cash to input, then the potential to secure funding is much greater. Some of these lenders will only be interested in your assets as opposed to scrutinising every small detail of your business. This means faster decisions, less waiting and puts business owners in a position to act quickly to secure deals.
The crucial point before speaking to any lender is to have a clear strategy and plan. As experienced commercial brokers we will know how best to position your case and whether or not its likely to be successful.
For more information about the exciting lending solutions then please get in touch: