How big is your property development project?
The finance options available to you are dependent on the scale of the work required:
- Light redevelopment/refurbishment loan: for relatively unobtrusive, decorative and non-structural work to the property, which doesn’t require planning permission or have to comply with building regulations, including upgrading bathrooms and kitchens and replacing floor-coverings. If you can keep the time-scale of the renovations tight, bridging finance will work well for you.
- Heavy refurbishment loan: for major structural changes, including building on an extension and altering internal supporting walls, where the total project will cost more than 15% of the value of the property. With a longer project time, and possible delays for planning approvals, you will need bridging finance running for longer than the standard maximum of 12 months. Most lenders can offer up to 18 months, and some will lend for up to 36 months.
- Ground-up development: a major new-build project involving complete building plans that must be approved, and a team of architect, builders and tradespeople working together, requires more complex development finance with a more series of investment releases.
How much can I borrow / how much will it cost?
How much you can borrow & how much it will cost will come down to your project and the security and experience you can demonstrate. Headlines on what we can source through our network are:
- Borrowing from £50,000 to £25M from 1 month up to five years
Funding Solutions For Developers
A range of finance options have been developed by the market that can overcome these issues for you.
- Short Term Finance
Short-term finance offers developers a quicker way to access development finance.
We work with lenders who can provide finance within as little as seven working days as a short-term solution to “bridge” the gap of any shortfall in funding.
Bespoke bridging loans can be tailored to specific purposes and lending terms, but they are commonly used for developments such as:
- purchase at auction
- buying commercial property
- land purchase
- conversion work
- self-build projects
- purchasing residential property
Light refurbishment bridging loan
Usually with slightly lower interest rates, these are tailored for smaller development projects. There is no strict definition of a light refurbishment project, but usually it is one where:
- Planning permission is not required
- There is no change to the nature of the property
- Building regulations do not apply
Heavy refurbishment bridging loan
These are offered as finance for larger development projects, where the lender’s risk and administrative involvement is greater – consequently their interest rates are higher.
A Heavy Refurbishment bridging loan will be appropriate for projects where:
- The light refurbishment criteria do not apply
- Structural refurbishment is required
- The development costs more than 15% of the value of the property or land
- Development finance
The best finance rates for development funding are commonly reserved for experienced property developers: to access the best deals lenders will require evidence of a proven track record of successful projects. There are lenders we work with who are happy to provide property finance to new of less experienced developers if your project satisfies their criteria.
Gross development value (GDV)
The estimated open-market value of your finished property or development is a key metric in development finance (along with development experience and your personal financial situation).
Most development finance lenders are comfortable with granting development loans up to 65% of the GDV, if they are comfortable with the project plans and financial projections.
Up to 100% of the development finance costs
If you require funding to buy land and then the development costs, dependent on the project lenders will want you to put in 30% of the acquisition cost. The balance & 100% of the building costs can be funded on the basis that overall funding does not exceed 65% of the GDV. For the right projects additional mezzanine finance can be sourced up to 90% of GDV.
A number of lenders in the development finance market are prepared to provide the entire funding for the purchase of property/land plus development costs to borrowers who qualify for development finance.
If the cost of servicing a 100% loan is not an issue this can be an extremely useful scale of funding for your project, allowing you to invest in other projects at the same time.
How To Access Finance For Your Development Project
Our broker at Construction Supermarket have a strong relationships with private banks, specialist lenders, family offices and wealth managers, means that we can look at the widest range of funding available to find the best business finance solution for your development. With their offices in London, Bristol (Registered Office) and Cardiff they are authorised and regulated by the Financial Conduct Authority.