Development Finance

Find the right property development financing solution for your needs

Finding the right financing solution for your property development project is essential for ensuring that you have the resources you need to bring your vision to life. There are a variety of financing options available, each with its own set of pros and cons, so it’s important to carefully consider your needs and goals before making a decision. Here are some key factors to consider when choosing a property development financing solution:

Your development vision: The first step in finding the right financing solution is to clearly define your development vision and understand the resources you need to make it a reality. This will help you identify the financing options that are most suitable for your needs. You will also need to provide a cashflow forecast and development finance appraisal.
Your financial situation: It’s also important to consider your current financial situation, including your credit score, debt-to-income ratio, and other financial factors. This will help you determine which financing options are realistic and achievable for you.
The terms and conditions: It’s crucial to carefully review the terms and conditions of any financing you are considering. This includes the interest rate, repayment terms, and any fees or charges associated with the loan. By understanding these terms upfront, you can ensure that you are getting a fair deal and that the financing solution you choose is aligned with your long-term goals.
The repayment schedule: Another important factor to consider is the repayment schedule for your financing. This includes how often you will need to make payments, the amount of each payment, and the length of the loan term. It’s important to choose a repayment schedule that is manageable for you and that aligns with your financial goals.
The lender: Finally, it’s important to carefully research the lender you are considering. This includes understanding their reputation, financial stability, and customer service record. By working with a reputable lender, you can increase your chances of success and ensure that you are getting a fair and transparent financing solution.

In conclusion, finding the right property development financing solution for your needs is essential for ensuring that you have the resources you need to bring your development vision to life. By carefully considering your development vision, financial situation, terms and conditions, repayment schedule, and the lender, you can choose a financing solution that aligns with your goals and supports your long-term success

Maximise your investment potential with property development financing

Property development financing can be a powerful tool for maximising your investment potential and realising the full potential of your development project. By securing the right financing, you can access the capital you need to bring your development vision to life, and create a valuable asset that generates income and supports future growth. Here are some key ways in which property development financing can help you maximize your investment potential:

Access to capital: One of the main benefits of financing is that it allows you to access the capital you need to get your project off the ground. Whether you need to purchase land, pay for construction costs, or cover other expenses, financing can provide the financial support you need to make your project a success.
Greater control: Financing can also give you greater control over your development project, allowing you to make decisions and allocate resources based on your own priorities and goals. This can help you ensure that your project is aligned with your long-term vision and that you are maximizing your investment potential.
Potential for growth: By using financing to bring your development vision to life, you can create a valuable asset that generates income and can be used to finance future projects. This can help you grow your real estate portfolio and expand your investment opportunities over time.
Risk management: Financing can also help you manage risk and protect your investment. By working with a financing partner, you can ensure that you have the financial support you need to weather any unforeseen challenges that may arise during the development process.
Tax benefits: In some cases, financing your property development project can also provide tax benefits. For example, you may be able to claim tax deductions for interest paid on your loan, or for certain costs associated with the development process.
Improved credibility: Finally, financing your property development project can also improve your credibility and help you stand out in the market. By demonstrating your financial stability and commitment to your project, you can gain the trust and confidence of potential investors, partners, and customers.

In conclusion, property development financing can be a powerful tool for maximising your investment potential and realising the full potential of your development project. By accessing the capital you need, gaining greater control over your project, and maximising your potential for growth, you can create a valuable asset that generates income and supports future growth.

Get the funding you need to bring your development vision to life

Securing the funding you need is a critical step in turning your property development vision into a reality. Without the right financing, your project may never get off the ground, or may be hindered by financial constraints. Here are some key points to consider when seeking funding for your property development project:

Determine your funding needs: The first step in securing funding is to determine exactly how much you need and what you will use it for. This will help you identify the most suitable financing options and ensure that you have the resources you need to complete your project.
Explore your financing options: There are a variety of financing options available for property development projects, including traditional bank loans, private loans, and crowdfunding. Each option has its own pros and cons, so it’s important to carefully consider your needs and goals before making a decision.
Understand the terms and conditions: It’s also important to carefully review the terms and conditions of any financing you are considering. This includes the interest rate, repayment terms, and any fees or charges associated with the loan. By understanding these terms upfront, you can ensure that you are getting a fair deal and that the financing solution you choose is aligned with your long-term goals.
Build a strong financial profile: To increase your chances of securing funding, it’s important to have a strong financial profile. This includes having a good credit score, a solid track record of managing your finances, and a clear plan for how you will use the funding. By demonstrating your financial stability and responsibility, you can increase your credibility and make yourself a more attractive candidate for financing.
Consider alternative financing options: If you are having difficulty securing traditional financing, there are other options to consider. For example, you could try crowdfunding, where you can raise funds from a large number of investors online. You could also consider seeking funding from private investors or venture capital firms, or by partnering with other developers or real estate professionals.
Negotiate the terms: Once you have identified a potential financing partner, it’s important to negotiate the terms of the loan to ensure that they are favorable to you. This may include negotiating the interest rate, repayment terms, or other terms and conditions. By negotiating effectively, you can maximize the benefits of your financing and ensure that it supports your long-term success.

In conclusion, securing the funding you need is a crucial step in bringing your property development vision to life. By carefully considering your financing options, understanding the terms and conditions, building a strong financial profile, and negotiating effectively, you can secure the financing you need to make your project a success.

Obtaining property development finance in England

Introduction

Securing finance for your property development project can be a daunting process. In the UK, there are various sources of funding available to developers and understanding how to apply for them can help you get the funds you need. In this blog post, we’ll look at how you can apply for property development finance in the UK

Types of Property Development Finance

There are several types of finance available for property development projects in the UK. These include bank loans, private lenders and equity partners, government grants, and crowdfunding campaigns. Depending on your qualifications and current financial situation, one or more of these options may work best for you

Applying for Bank Loans

Banks offer a variety of loan products that can be used to fund property development projects in the UK. Generally speaking, these loans will require you to have a good credit rating and some form of collateral such as land or existing properties. You should expect that banks will also ask for detailed business plans before they will approve any loan applications

Lenders and Equity Partners

Private lenders and equity partners can be great sources of financing if you don’t qualify for traditional bank loans or want to avoid taking on more debt. Private lenders typically charge higher interest rates than banks but do not require collateral or detailed business plans. Equity partners provide capital in exchange for a percentage of ownership in your project which allows them to share in any profits that are generated from it.

Grants

The UK government provides various grants to support property development projects throughout the country. These grants are competitive and vary depending on the type of project being undertaken and its location within the country. It is important to note that grant applications can take months (or even years) to be approved so this option may not be ideal if you need immediate financing for your project.

Conclusion on how to apply For Property Development Finance in England

Property development finance is essential if you want to successfully complete your project on time and within budget. Understanding how to secure financing is key, as there are several options available including bank loans, private lenders, equity partners, government grants, and crowdfunding campaigns with each having their own distinct advantages and disadvantages. Ultimately, it is important to research all potential sources carefully before making any decisions about which type of finance is right for you and your project goals. Good luck!

Applying for property development finance in the UK

Introduction:

As a property developer in the UK, you may need to apply for development finance at some point. Whether you’re looking to purchase or refinance a plot of land, or require financing to build out your project, there are a number of steps you need to take to ensure that your application is successful. Read on for more information about how to apply for property development finance in the UK

The Application Process

The first step in the application process is gathering all of the necessary documents and paperwork that will be required by lenders. This includes financial statements, such as accounts receivable/payable reports and balance sheets; proof of ownership of any current properties; and details regarding the project itself, such as drawings and estimates. Once you have collected all of these documents, it’s time to begin shopping around for lenders

When selecting a lender, it’s important that you thoroughly research their terms and conditions before committing yourself. Make sure that you understand what interest rates they offer, as well as any fees or charges associated with the loan. It’s also important to look out for any pre-payment penalties – many lenders will charge a fee if you pay off your loan early. When comparing different lenders, be sure to ask questions about their experience in dealing with property developers – this can give you an idea of how knowledgeable they are when it comes to dealing with projects like yours.

Once you have found a suitable lender and agreed upon their terms and conditions, it’s time to submit your application. After submitting your application, most lenders will carry out an assessment process which usually involves credit checks and an analysis of your financial situation. If all goes well during this stage, then the lender will proceed with underwriting your loan – this usually takes two weeks or longer depending on how complex your project is. If everything checks out during this stage then congratulations – you have successfully applied for property development finance in the UK!

Conclusion

Applying for property development finance in the UK can seem daunting at first but if you follow these steps then it doesn’t have to be so overwhelming! Do your research carefully when selecting a lender – make sure that their terms are suitable for both short term and long term projects – and that they understand the complexities associated with property development projects like yours! Finally, submit all relevant documents and paperwork required by the lender during their assessment process – if everything looks good then congratulations – you’ve just secured yourself some much needed property development finance! Good luck!

Tips on how to build your own house

Building a house can be a complex and challenging process, but with careful planning and attention to detail, it is possible to achieve your dream of having a custom home. Here are some tips to help you get started:

Create a budget and plan: Determine how much money you have to spend on your new home and create a detailed plan for how you will allocate your budget. Consider hiring a financial planner or consulting with a mortgage lender to help you with this process.
Choose a location: Consider the location of your new home carefully. Think about the climate, the proximity to schools and other amenities, and the overall neighborhood.
Choose a design: Select a design that meets your needs and preferences, and work with an architect or designer to create a floor plan and exterior elevation that reflects your personal style.
Obtain building permits: Before you begin construction, make sure you have obtained all necessary building permits and approvals from your local government.
Hire a contractor: Choose a reputable and experienced contractor who can help you manage the construction process and ensure that your new home is built to the highest standards.
Choose materials: Select high-quality materials that will withstand the test of time and meet your budget constraints.
Supervise the construction process: Regularly visit the construction site to ensure that the work is being completed to your satisfaction and that any problems are addressed in a timely manner.

By following these tips, you can build a home that meets your needs and reflects your personal style.

How does development finance work?

How does development finance work is a question that we get asked on an almost daily basis.

Because of the way this type of finance is arranged, it can look like it is more complex and difficult than it actually but let’s not forget it’s in a brokers interest to make it more difficult than it actually is because then it means the borrower will have to utilise the services of a broker, rather than going to a lender directly. Even first time developers can obtain finance.

You can also view a number of case studies on our site, this one was for property development finance North Wales.

Okay first things first, what will the lender want to see at the start?

List of required items for a development finance loan application

Cash flow forecast
Development appraisal, CV or bio of the borrower or borrowers
Images or photographs of the security that the borrower is trying to fund
Sales information on the completed property valuation in the open market
Details of the exit strategy. This will need to be more than the borrower simply stating their exit strategy is to sell the completed units or refinance to to another lender. The development finance lender will want to have more certainty and more comfort surrounding the exit than just a throwaway line and they may ask to see evidence
If applicable, planning application numbers or details of the full planning approval decision
Details of the main contractor, their financial standing and their experience

The lender will assess the loan application in a number of key areas, they are:

The borrower

Will the borrower have the knowledge and experience to complete the development finance project on time and under budget. If not, do they have professionals around them who can help them to achieve this and all these professionals experienced in the type of work that the borrower is looking for them to do. In other words you do not want to be employing the services of a roofer to complete the construction of a three bedroom property as they simply will not have the experience or expertise needed to do this correctly. The lender will insist on seeing details and evidence of recent similar bills that the main contractor has undertaken. For example, if the borrower is thinking of using a main contractor to build a property from the ground up and they’ll need to say that that main contractor has done something similar within the last two or three years because a builder he can only evidence similar bills from 10 years previously will not be acceptable to the lender.

The numbers

Do the numbers stack up? The lender will want to know if the sales price of the completed units (GDP) is achievable in current market conditions and they will use the online property portals and their own internal valuation software to check if this is achievable against what has been said. They will also have their own in-house QS to check that the build costs and overall construction costs (including professional fees from people such as architects, designers and engineers) are consistent with a build of the type and justice importantly, will be costs that the borrower has stated ensure that the build will be finished on time and to a certain standard as that is vitally important. One thing that every lender will also check is to ensure that the borrower is not taking out a salary whilst the building/construction is going on and they will also check to make sure that the borrower is not trying to fund legal fees or selling fees within the total bill costs that they have stated because in the lender will fund these particular items. The interest rates charged by development finance lenders will also have an impact on the amount that can be borrowed.

The security

The development finance lender will rely on the initial valuation to understand the value of the security that has been offered because this is what our lender will base their lending on. When we say value we actually look at a number of different values not just the current open market valuation or OMV. A lender will also need to see the 180 day valuation, the 90 day valuation and in the case of a commercial property such as a hotel or care home, the lender will also need to see the VP or vacant possession valuation. The lender will also look closely at resale values and specifically, how long it will take that property/a security to sell at that price in current market conditions.

How will the loan be repaid

This is probably the single most important point for a bridging lender or development finance lender. Because development finance loans are all over a maximum term of 24 months, these are considered short-term loans and are not designed to be used for a borrower looking to buy or fund a property over the next 25 years.

All lenders in the development finance sector will want to see a clearly defined exit plan on how their loan will be repaid at the end of the term be it three months, six months or 24 months it doesn’t matter, the lender will want to see that the borrower has plans in place to repay the loan on time.

The other important factor in this, is that the lender will want to see that the borrower would be able to refinance to a long-term commercial lender such as a High Street bank like NatWest or Santander, if they’re unable to sell the property. The reason the lender has to ensure that the borrower is a viable option it’s because those long-term lenders will do a credit check and possibly credit score the borrower and if they fail that (due to previous or ongoing adverse credit issues, then the long-term commercial lender will not consider funding them and that means that the borrowers only option to repay the development finance lender is to sell the property.

Should I pay for a development finance course?

Honestly?

No.

The information available on all of the courses you see advertised is readily and freely available online and there is absolutely no reason to pay for a development finance course.

Are property training courses a scam?

There is absolutely no question that some of these property training courses are nothing but scams. Fortunately, the vast majority do offer valuable information but as we have said before, the information you receive on these courses is already in the public domain so there is no need to pay the vast sums that they are asking.

In our opinion, the only value you will extract from these courses is the ability to network with like minded individuals who are also starting their property journey. This will give you an opportunity to share stories, success and disappointments. But again, whilst valuable to do so, it’s really not value for money to pay £10k + for the property training just to network.

But they tell me I can buy property with no money down?

Yes they do but no you can’t. Not now anyway or to be more precise, you can, but with a very limited set of options which are also hugely expensive.

There used to be a way of doing this by buying a property under value, also known as BMV. This is an example:

Property is valued at £350,000.

Property is actually for sale for £325,000 because the seller is in financial distress and by accepting the lower offer they can repay their outstanding mortgage of £315,000 before their lender repossesses the property. Obviously speed is the main factor here.

Now, most lenders used to offer 90% of the valuation (in this case £350,000) and 90% of this figure is £315,000…Exactly what the purchase price is so you would think that is a real result.

Two problems here. One is that very few lenders currently do 90% of the PP anymore. Those that do will really make hay by charging a high interest rate and high fees. The second problem is that there are still other fees to pay such as Solicitors fees, valuation fees, possibly QS fees so the reality of it being a ‘no money down’ bridging or development loan is sheer fallacy. Yes, a first time property developer can borrow money to undertake a development but there are so many other factors to consider.

Social media is part of the problem here. So many YouTubers, Instagrammers and TikTokers will tell you how they have made a fortune buying a property with no money down and how they have made their fortune from a career in property development with absolutely no experience.

Complete rubbish.

If the information they provide is so valuable and can lead to a lucrative career, why would they provide this information?

You are absolutely right.

Surely if the information that these so called property masterminds or trainers provided is so valuable and earns them hundreds of thousands of pounds even millions of pounds (according to a few property trainers), then why on earth would they allow people to take advantage of what they know? Giving something back? Don’t make us laugh.

It doesn’t matter if one of these courses charges £20,000 (and some of them do), the fact is there is not one single person who would sell this information if it meant that they could potentially lose out on their own earning potential.

No one will sell information, no matter how much they sell us information for. It doesn’t matter. This is why most property training courses or a complete scam.

It comes back to the same thing every single time. If the information provided was so valuable and potentially so lucrative, why on earth would they offer it to the general public, surely they will keep it to themselves so they can earn even more money. It just doesn’t make any sense

development finance for first time developers

Development finance loans for first time developers

Can a first-time developer get approved for a development finance loan? More specifically, a ‘ground up’ development finance loan?

Yes they can if they know what they need to do to prepare their application.

It is a bit of an urban myth to suggest that the only people who qualify for development finance loans are experienced developers. We provided a development finance loan to a first time developer in Christleton, just outside Chester, despite the 6 month battle he had with the Cheshire West and Chester council planning department. You can check that out here: Property Development Finance Chester

Of course lenders would prefer that all of their borrowers or developers have experience, however it is not the be all and end all.

There’s not much difference between an individual having a lot of experience in property development or that of an inexperienced individual who has an experienced and professional building and professional team working right alongside them. Development finance loans are not just the preserve of the rich or well connected – they can be and are available to everyone.

In fact we would go as far as to say that a borrower who has experience of buying and selling properties, refurbishing them and perhaps adding extensions or making major alterations that has no ground up experience but also has a hugely experienced team working with them, is a better bet for the lender than an experienced property developer who is subcontracting work out to lots of other individuals. Please note: All lenders will insist on collateral warranties on the design and build team (main contractor, architect, etc)

Every lender who lends money on a property development finance project will also retain the services of an experience qualified quantity surveyor or QS. This QS acts on behalf of the lender to ensure that the build is being done to a satisfactory standard, that meets all current building regulations and they will also ensure that the build is on time and under budget.

Although the QS is paid for by the borrower they actually in the interests of the lender. The borrower will have to pay the QS for an initial report which will be addressed to the lender and they will also have to pay for every visit and ever report thereafter, that the QS makes to the site.

These reports are then used as the basis for the drawdowns which the lender will agree to only after they have received a report from the QS that is satisfactory and presents no issues. Any lender offering development finance loans will insist on this happening.

Furthermore, the lender will also ensure that their own stuff, usually a member of the senior management team, we’ll go out regularly to inspect the property and meet with the borrower and developer to ensure that they also have a good understanding of where the development is currently at. Quite often these visits to the site alone, will be unannounced.

Development Finance Loans

Lending criteria

In terms of land sizes on development finance loans for first time developers, it is unlikely that any lender will approve alone above £2 million. Certainly not for the first development by this particular borrower or developer. When the build has been completed satisfactorily and the properties are either sold or the loan is refinanced to another lender, then the existing lender will consider lending more to the borrower the next time they come to fund a project.

The other thing which will make it easier for the first time developer to get approved for finance, will be if the security or land in question, that they are looking to buy is in an area where there has been other residential development, then the chances are that the lender will look at this more favourably than if a developer was looking to build on say brownfield sites.

This is because brownfield sites are, as a name suggests, sites that have previously housed industrial or commercial units or buildings and not residential, this means that could be unknown issues when building residential for the very first time, but when we say unknown issues, we usually mean problems that could be discovered underneath the ground and not above.

In summary

Make sure you have an experienced and professional team working alongside you
Make sure you have a detailed development appraisal
Make sure all of your numbers stack up particularly sales values, build costs, infrastructure costs, finance costs and any associated professional fees
Make sure you have a clearly defined exit, in other words, how you will repay alone on time and on the budget
Be clear, honest and transparent in all your dealings with the lender

To find out more, contact us.

Development finance lenders

The last time we looked they were over 200 bridging and development finance lenders in the UK short-term lending sector. The majority of these lenders only offer bridging loans so after you take out all of the bridging lenders, you are left with a core of around 14 or 15 development finance lenders.

Further still, not all of these 15 or so development finance lenders will finance a development from what is known as the ‘ground up’.

This means a property that has been built from scratch, hence the term ground up.

This type of lending is considered for more risky than traditional bridging finance because of the pitfalls and the problems involved. Some of the common issues with development finance in terms of risk are cost overruns, unable to sell the finished properties, unsatisfactory work completed which has or will devalue the property when finished, the borrower or even the lender running out of cash.

That being said, the lenders that do operate in this market tend to be of a higher quality than that you will find with bridging lenders simply because of the experience and the knowledge of the senior members of staff at that particular lender.

The development finance market is dominated by the large players, lenders such as West One Loans, Together and LendInvest, however there have been a number of new entrants to the market who have come on board with a lot of cash and a lot of quality personnel, one of them being Breeze Capital who are starting to make waves.

Can you trust a development finance lender?

That is the big question and it’s not an easy one to answer.

From the borrowers perspective, it is important that you understand where the lenders capital is coming from. The last thing you want as a developer is to start a project and then find out that the lender who is supposedly funding you has run out of cash.

Believe us when we say that this happens a lot more than you might think. If the lender is funded from what is known as the peer-to-peer model, then this is likely to happen more frequently because in the peer-to-peer model, where each loan is funded by many hundreds or even thousands of investors then there is no guarantee that the money will still be there for the borrower or developer, by the time you get to drawdown your payment.

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