Property Development Finance

“Development finance loans can range from £100,000 upwards to the tens of millions.”
Call us now 0330 127 3524
Commercial Property
Buy-to-Let
Bridging Loans
Loanable Limited is a credit broker & not a lender
Call us now
0330 127 3524
Commercial Property
Buy-to-Let
Bridging Loans
Loanable Limited is a credit broker & not a lender

Property Development Finance

If you are in the business of commercial property, and commercial property development, then you know it can be a very competitive business, in which timing can be everything!

Time is money, and if you are waiting for financing to develop a new project, or add-on to an existing one, it is costing you money.

In addition, there are unique financing features which can be considered and a part of a development finance venture. As a commercial landlord or developer, you may already have existing properties that you can use in the seeking of new loans and finance. You may also be able to combine or cut arrangement fees when financing multiple properties.

This is where working with one broker, such as Loanable, can be a very sound working relationship!

Looking for a loan today?

What is Development Finance?

Development finance are loans provided to builders, property developers, even large scale buy-to-let landlords, which allows them to purchase new commercial properties, or complete existing properties they may have, and need to develop further.

Development loans are a short to medium term loan, which means they may be for a few weeks or months, to a year, or longer.

The loan itself can be released to the borrower in instalments, as the project or renovations are completed. The releasing of funds from the loan can be at key phases in the project, or can be released when additional cash flow is required.

The amount of a development finance loan can be from £150,000, to as high as in the millions, even £25 million. The loan amount will depend on the project, how much of a loan is required, and what is the forecasted market value of the operation.

The loan or GDV/Gross Development Value, is usually capped at 65% of the forecasted market value.

An example may be that a borrower has a project which has a forecasted value of £1 million upon completion. This means the maximum loan amount would be £650,000 or 65%.

Auctions

Many commercial property developers use auctions as a way to buy properties at a reduced rate, which is good, but there can be two (2) caveats to this:

* The time frame in which the buyer has to come up with the funds, usually within 28 days.

* Many auction properties may be in distress or require refurbishment and to be fixed up.

Development loans can be a way to bridge the need for quick finance. It may even be possible for borrower to pledge or use equity in other properties as a deposit, or form of security for these types of purchases, and also for other commercial property ventures.

Obviously commercial borrowing and development loans are not for the faint of heart. In being considered for such financing lenders will look at a builder or property developers track record, and past successes.

Credit histories for the builder or developer, or their company, is also a consideration.

This and the projected value of the project are all used in determining if a loan will be approved, the loan amount, and also terms and interest rates.

First Time Applicants

If this is your first commercial project to develop or build, you need to be realistic about expectations, and what may be required of and from you.

Lenders may want to commission reports and due diligence work, prior to granting a loan.

You may wish to have your research and details about the project, such as chain of title, estimated time frames, planning commission concerns, etc, all ready if you are asked about them.

Everyone has to start somewhere, and there is always a first time, having everything lined up prior to speaking to a lender can help get you the loan you need.

Why Loanable?

* Professionals in the field of lending, commercial and personal loans

* As a broker we do the shopping around for you to find you not just the best deal, but the best loan suited for your needs

* Speed: time is money, and at Loanable we know it, you need your financing quickly as to not lose out on a good deal and savings

* No upfront fees or charges, period!

* No fees: just to remind you:)

* Quick and easy online application

* Your details are safe with us, we never, ever sell or exchange them…ever

Looking for a commercial development loan or some form of commercial financing, complete our easy online application today!

FAQs about Development Finance

What is development finance?

Development finance is a loan that is provided for new building projects or for the (usually large scale) renovation of existing projects.

What do I need to be eligible to apply?

You will need to show proof of income, photographic identification and proof of address as well as a copy of building insurance in some cases. Additional information may also be required which can vary from lender to lender. For an ultimately successful application, a security asset is likely to be required as a form of collateral – typically property held in the applicant’s name – as well as sufficient credit scores and levels of income being met.

Can I use development finance to renovate my house?

Property development finance is generally provided for larger scale projects undertaken by professionals within the industry such as builders or property developers. Therefore, for the building or renovation of an individual’s property, this loan product isn’t appropriate.

What are the minimum and maximum amounts that can be borrowed?

Generally speaking, the minimum amount that can be borrowed is £150k. The maximum amount can be £25M and beyond. A lot depends on the development project in question (in particular the GDV) and the track record and credit worthiness of the applicant.

What is Loan to Gross Development Value?

This helps determine, in tandem with other considerations, the amount that a borrower may be willing to lend – and it is expressed as a percentage of the projected open market value of a completed development project.So, if the gross development value (GDV) is 60% and the projected market value of the development project is £1M then the loan amount offered based just on GDV would be £600,000

Will my loan amount be released to me in one lump sum?

Not necessarily, no. In fact, it is commonplace for the funds to be released in increments so as to finance particular key phases of the development project as and when they occur. These phases – and the amount required for each one – are pre-agreed by the lender and borrower.

Can I receive VAT funding as part of a development finance loan?

Yes, we have lenders on our panel who will lend against VAT that may be payable as a result of a property purchase.

What is pre-construction finance?

This is finance which is typically offered to property developers who are looking to obtain planning permission to a site or who are looking to modify the existing planning restrictions on a site.

What is loan to cost?

This is the maximum amount a lender will provide a borrower – expressed as a percentage of the overall cost of the building project. So, if loan to cost is 70% and the overall cost of a development project is £1m, then the maximum that may be borrowed based on loan to cost is £700,00 (70% of £1M)

What is a security property?

This is a property asset which the lender uses to guarantee the loan amount. Should the lender default in repaying the loan, the lender could enforce the sale of the security property to recoup monies owed to them.

What is “development exit?”

This is a term that can be used to describe the early exit from a development finance arrangement. It is not uncommon for there to be charges incurred for a development exit.

Is development finance only available to builders and property developers?

Typically, yes, it is only available to professionals within the field given the generally large scope and costs of the projects in question.

Can I apply for development finance to use on property outside of the UK?

No, the lenders on our panel will typically only provide loans to customers using the funds for projects in England, Scotland, Northern Ireland or Wales.

Can I apply for development finance to convert a property from a commercial to a residential premises?

Providing planning permission can be obtained, then the answer is yes. In fact, development loans are often used to convert the nature of a property, whether it be from commercial to residential or vice versa. Development loans are also commonly used to create “mixed use” premises comprising commercial and residential elements.

How quickly can I receive funds?

If the loan applicant’s solicitor already has the necessary paperwork completed, then funds can be received between 2 and 3 days after the loan has been accepted. However, in practice, funds are typically received around 2 weeks after the loan has been accepted.

What is a “mixed use” development?

This is a development that is made up of commercial and non-commercial (ie residential) premises.

Can I apply for development finance for mixed use premises?

Yes, there are a number of lenders on our panel who will provide loans for mixed use premises; this is a common way such a loan is used.

Can I apply for development finance for student accommodation?

Yes, we have lenders on our panel who will provide loans for student accommodation

What is the maximum loan re-payment period?

Loans are normally repaid over a period of between 6-18 months. It is rare for a property development loan agreement to last for more than 24 months.

What is a QS report?

This is a Quantity Surveyor report and it goes towards determining if a building is fit for commercial and/or residential use.

Can Limited Liability Partnerships apply for a property development loan?

Yes, we can match LLP’S with prospective lenders. We can also match sole traders, individuals and PLC’S with lenders, too.

What’s the minimum amount of interest I can expect to pay on my development loan?

While this can vary quite widely depending on the borrower, lender and the amount in question, the minimum rate of interest you can expect to pay is 3%, although more typically it will be around 6-7%

Can I obtain development finance if I don’t have planning permission for the land to be developed on?

Although it may be possible – usually in the event that a developer or builder is very experienced and has a strong track record – it is very uncommon to obtain this type of finance without planning permission. allow you to do this while others will not. If this is an option provided by your lender, you may also incur extra costs – often known as renewal fees. This is one of the many reasons why it’s always crucial to carefully consider all the conditions of a loan agreement before entering in to it.

If I default on my loan having used my home as security, can my home then be repossessed?

While the lender will most likely try to work towards a solution with you to prevent this happening, the repossession of your home is still ultimately a potential consequence of defaulting on your loan.

Will I have to pay legal fees that the lender may incur as part of the lending process?

You can expect the lender to want to carry out independent due diligence to ensure things such as a clear chain of title in the land, valid and appropriate planning permission and the land’s general suitability for development. The costs incurred in these areas are most likely to be payable by the borrower.

Can someone with a CCJ apply for development finance?

We have lenders on our panel who will consider such applicants. A lot will depend on the circumstances of the CCJ and the applicant’s present financial circumstances and overall track record.

Can I re-mortgage my home to release equity to fund property development?

Yes, you can. However you should always complete detailed research regarding your proposed investment and be confident in its financial returns.

Will I be charged an exit fee if I wish to conclude my development finance agreement early?

There are lenders who will charge you an exit fee – expressed as a percentage of the loan amount. This is why it’s important to be fully up-to-speed with all the conditions of your loan agreement prior to signing it

What is a non-standard construction and can it be used as security for development finance?

Typically, this denotes a property made from non-standard building materials and it is unlikely that you will be unable to use this as a security asset.

Can I offer purely commercial property as security for development finance?

Some lenders will allow this while others will not. A lot will depend on the perceived value of the proposed asset.

What can I offer as security to obtain development finance?

You can offer as security existing property that you have equity in, mixed used property (which means it comprises a commercial and non-commercial element) and also land for which (most commonly) planning consent has already been granted

What is Joint Venture Development finance?

This is where someone who has sought development finance pairs with a partner who brings the additional funding and/or expertise required to complete a development project.

Can I offer purely commercial property as security for development finance?

Some lenders will allow this while others will not. A lot will depend on the perceived value of the proposed asset.

What can I offer as security to obtain development finance?

You can offer as security existing property that you have equity in, mixed used property (which means it comprises a commercial and non-commercial element) and also land for which (most commonly) planning consent has already been granted

Can I offer purely commercial property as security for development finance?

Some lenders will allow this while others will not. A lot will depend on the perceived value of the proposed asset.

What is a non-standard construction and can it be used as security for development finance?

Typically, this denotes a property made from non-standard building materials and it is unlikely that you will be unable to use this as a security asset.

Will I be charged an exit fee if I wish to conclude my development finance agreement early?

There are lenders who will charge you an exit fee – expressed as a percentage of the loan amount. This is why it’s important to be fully up-to-speed with all the conditions of your loan agreement prior to signing it.