Whether you have just received planning permission or are nearing completion on existing building works, development finance can provide the vital funds to take your project across the finishing line.
What can development finance be used for?
If you are looking to invest in residential, commercial or mixed-use property to build or renovate, development finance can fund the work involved. From a small, single flat restoration to a large-scale commercial project, most ventures will require additional funds to successfully reach completion.
Although development funding is open to a wide range of projects, it can be very difficult to raise without full planning consent having been awarded. Unless you are a highly experienced developer with a number of development projects under your belt, you should finalise all planning permission and documentation before approaching a lender.
What considerations are made by a lender?
Development finance is not awarded based on your experience but more on the potential held in the development you’re planning.
A lender is interested in the assets you are able to offer as security and the feasibility of the project you are proposing.
They will also consider how long the project will take to complete, the overall costs involved and the projected end value of the development in question.
How is the finance calculated?
Development funding is awarded based on the future value of the project, once the properties have been built or renovation works completed, rather than just the current value of the land or existing property. This is known as the gross development value (GDV) and funding is calculated as a percentage of this.
Most funders will typically lend anything up to 75% of the final value, although the standard is 60-65% of GDV.
Who should consider development finance?
You could be a professional developer or an inexperienced land-owner, as long as you have a development project in mind, you could benefit from funding to support your project.
Development finance is relevant if you are:
- An experienced developer
- Developing your first property
- Buying to refurbish and sell-on
- Working on building a property portfolio
- Underway and in need of funds to complete
- Converting for residential use
Development finance can either be arranged in full at the outset, or halfway through a building development. Either way it is typically paid out in increments at varying points towards completion.