What is development finance?

Development finance is a short term loan used by property developers to either purchase a site for a development, cover the costs of building the development, or both.

This development can take many shapes and forms but the ultimate goal is to sell or rent the property or properties for profit. This makes development finance a commercial loan.

Whether your plans are small or large, our development finance team can find the right lender for you from our range of specialist lenders. Unlike a residential or traditional buy to let mortgage, development finance is a bespoke financial solution to your project, the rates will vary depending on your project and the lender you choose to proceed with.

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How does development finance work?

There are multiple steps to securing development finance:

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1. Get in touch with our team to go through our ‘fact find’ process, where we will ask you about the project in detail to confirm if we are able to help you.

2. Our development finance advisors will go away and locate the lender they identify will best suit your needs and circumstances, from our panel. Alongside this, they will identify a suitable exit strategy for you.  They will secure a decision in principle from the lender, which comprises the rate and terms of the deal. They will present this information to you.

3. If you are happy with the terms of the product recommended, your application can then be submitted to the lender.

4. The lender will review the information that we have submitted for you and arrange a site visit. This is so they can get a better understanding of the circumstances of the project.

5. The site visit is followed by a report on the project, which is submitted with your documents to the underwriters. Your account manager will then support you with any additional information that they require and keep you updated on the process.

6. The lender may require a valuation report from a surveyor, which will detail the building costs, anticipated value and the end value of the project.

7. You will then receive a formal offer letter which will need to be signed and returned. This is when you should instruct a solicitor (to be confident of smooth progress, one who has development finance experience is essential) to carry out the legal work.

8. The funds will be released to you.

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With some larger projects, the release of funds is split though a series of drawdowns, subject to a monitoring surveyors sign off. The lender will instruct a surveyor to go and inspect the works to check that everything is proceeding on track with the proposal. They would collate a report and then the funds would be released following an assessment of the progress by the lender.

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What can I use development finance for?

You can use development finance for a number of uses:

  • Commercial/semi -commercial property development
  • Renovations
  • Conversions
  • Refurbishment
  • New builds
  • Residential property development for rental or sale
  • Single unit developments to large multi-unit schemes
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How long does it take to get development finance?

Completion of development loan applications usually take around 6 weeks. If this timeframe is too long, please get in touch with our team immediately and let us know and we can see what is achievable.

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How much can I borrow with development finance?

It depends! Each development finance solution is bespoke and will vary depending on the lender you choose to work with.

The loan is based on the likely end value of the project i.e. how much money you will make if the property is sold or rented out. Get in touch with our team today to see what options we may have for your development proposal.

Can I get 100% development finance?

No. Most lenders will cap the amount they are willing to lend at around 75% maximum of the end value of the project.

You may be able to get further development finance by putting up additional security, such as another property or valuable asset. The other way you may be able to achieve a greater development loan, is through a joint venture with the lender, where they will receive a profit share at the completion of the project.

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How long can you get development finance for?

Terms of a development loan vary, but are typically between 12 and 24 months. This, like many factors of development finance, is dependent on the project the finance is required for.

Some of the lenders on our panel charge exit fees. If this is something you want to avoid, tell your advisor during the factfind process, before they make their recommendation to you.

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What are the benefits of development finance?

While you may be able to finance the project yourself, you might consider using development finance because:

  • It allows you to take on more, or larger projects than you be able to take on otherwise, due to financial limitations. This could potentially increase your profit.
  • It allows you the financial freedom of not locking up significant amounts of funds until the project is sold or rented out.
  • It may give you the opportunity to be able to take on multiple projects simultaneously. This may mean you could avoid missing out on other potential opportunities.
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Do I need a development loan or bridging finance?

To find out if your project requires a bridging loan or development finance, speak to one of our team today.

You can submit a call back request, or speak directly to an advisor via the phone number at the top of the screen or our live chat feature.

You can also visit our bridging loan page to learn more about the uses for bridging loans.

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