Property Development Finance is a type of loan which provides money specifically for property development, secured against the property development site itself.

Most property developers borrow money to finance their projects, and such loans usually provide a lump sum towards the purchase of the land or property, followed by a specific amount made available to cover build costs and other associated fees.

The Costs to Complete part of the facility is made available in tranches, and in arrears. The build costs portion of the development finance facility works in staged payments, depending on the lender the funds will typically be released in monthly drawdowns.

Recently there has been a large influx of specialist lenders entering the development finance market all with varying requirements, being a specialist development finance broker we can use our knowledge and experience to assist you in finding the best facility to fund your project.

What is Property Development Finance Used For?

• Residential housing schemes such as affordable housing or social housing schemes of any size.

• Mixed-use schemes.

• Commercial schemes.

• Student accommodation.

• Hotels & leisure.

• Retail.

• Industrial schemes.

What are the Key Features of Property Development Finance?

• Loans from £50,000 with no maximum loan amount.

• Up to 75% of GDV or 90% of Project Costs using Debt Finance.

• Up to 100% of Project Costs using Equity and/ or Joint Venture Finance.

• 100% development finance is available with additional security.

• Arrangement Fees from 1%.

• Interest rates are from 4% per annum, with interest being retained or serviced.

• No exit fees.

• Up to 24 months (or longer, by arrangement).

What are the lending criteria for Property Development Finance?

• Detailed Planning consent needs to be granted (or Outline Planning with some reserved matters).

• Development Experience is essential for larger schemes. Some lenders will fund first-time developers.

• Fixed-price contracts with main contractors are preferred, but not always necessary.

• A clean & clear credit profile helps and is essential for the cheapest lenders, but adverse credit can be considered by some lenders.

• A valuer will be instructed to comment on the current site value, the proposed GDV, along with appropriate market commentary.

• A Monitoring Surveyor or Quantity Surveyor will be appointed by the lender, to audit the proposed build costs, monitor progress on-site, and assess draw-down requests for your building development finance.

• Draw-downs are in line with the building programme and cash-flow, to be authorised by the lenders monitoring surveyor.

• Commercial Property Development Lenders will generally require a pre-sale or pre-let to be in place.

What information would I need to provide?

• A Financial Appraisal.

• Detailed Build Costs.

• Cash-Flow.

• Planning Consent (and accompanying plans/drawings).

• Details of the procurement method (will you be using the Main Contractor on

  a Fixed Price JCT, or will you be building yourself, using your own team?)

• Details of the professional team (contractor, architect, structural engineer where applicable) – this is particularly important when applying for joint venture development finance.

• Schedule of the proposed accommodation (number of units, size, beds/ baths) and a breakdown of the proposed selling prices, to give your total Gross Development Value.

• Details of the borrowing entity/ borrowers.

• Developers/Applicant’s CV.

• Any information to support the proposed GDV (comparable sales and agents’ opinions).

How do I get property development finance?

Once your requirements have been established we can very quickly reduce the options to a few lenders.

We will present your proposed project to the relevant lenders. The lender will then provide us with Heads of Terms, outlining what they are proposing to offer and at what cost.