Development Finance FAQsBelow are the Most Frequent Questions Relating to Development Finance
We have access to lenders who will be willing to fund sites that do not yet have planning permission. This will allow developers the time needed to gain such planning permissions for intended development and/or change of use for the land in question.
Typically, lenders will not be prepared to lend as much against the value of the land – we would look to obtain a loan equivalent to 50% of the value of the land. The LTV (loan to value) may increase if there is an existing property on the site.
When planning permission has been granted we can look to raise further funds against the increased value of the development site and provide the finance you need for the build costs.
Yes. We will assist you to put together a comprehensive plan to ensure that the lenders we approach will be willing to work with you. Many lenders are happy to work with new developers but will feel more confident in supporting your project if you have thoroughly prepared a viable plan for the development. You will need to have certain information readily available, such as costs and contractor details, whether you have a fixed price contract with your builder, planning permissions amongst other important factors.
For this reason it is vital that you have the right team around you to advise you throughout the entire process.
We have secured finance packages for these types of permissions and have many lenders happy to look at these transactions.
Yes, we have access to many specialist lenders who are willing to offer secured finance packages for these types of permissions.
Lenders will be more concerned with an applicant’s scheme and experience of the development team rather than their credit rating. However, it is fair to say that having a good credit history will be preferable and poor credit may put off some lenders.
Yes. Developers looking for funding through limited companies will be required to provide personal guarantees from the directors, but other than that stipulation, the process will be the same as it is for borrowing in your personal name.
All lenders have their own unique terms, conditions and policies regarding how much they are willing to lend. Lenders will take the following into consideration when calculating loan amounts:
- The costs of the land
- Total development costs
- All applicable lender fees
- Solicitors/legal fees
- Brokerage fees (where applicable)
- Contingency costs
- Completion fees
Lenders typically offer up to 70% of the value of the land and 100% of the total build costs, however this may vary from lender to lender.
Development finance is released in instalments in line with specific stages of the development. There is an initial payment to secure the land and get the project started after which the subsequent payments will be made in accordance with the agreed schedule.
The majority of development loans will add monthly interest charges to the total cost of the loan. At the end of the loan period the loan is repaid in its entirety including the interest. Because of the way the interest is charges it is cost effective for the developer to repay the loan as soon as possible which will minimise the interest charges and reduce overall costs.
Lenders will not approve development finance until the borrower has provided a viable exit strategy which must clearly show the way in which the loan will be repaid. The most common way of repaying the loan is either through sale of the development or by refinancing. In order to establish a realistic exit strategy it is advisable to consult with an experiences development finance broker.