- 7th September 2019
- Posted by: DMM
- Category: Development Finance
The journey of being a developer of new homes will have challenges from securing a new site, finding property development funding, planning issues, unreliable contractors, delays with materials and the vagaries of the UK property market. These factors may be the day-to-day business of being a property developer but finding property development funding needn’t be as challenging as it seems.
The life cycle of a new home property development will start with the site finding exercise that may include scouring the online portals such as Rightmove and Onthemarket.com, building relationships with local estate agents or working with land finders.
Investigating a new potential development site will include fully understanding the planning consent and the likely scale of local authority contributions through Section 106 and the Community Infrastructure Levy (CIL) which may be required. Where a site does not have planning consent that some banks may not be prepared to lend until this is secured and, in these cases, finding the right bridging facility will be important.
It is worth considering the lenders perspective when finding property development finance. Property development finance involves risk sharing and so banks will want to understand their risk and minimise at as much as possible
Finding Property Development Funding – Understand your lender
The process of finding property development funding should start early as the process of receiving a formal facility offer may take weeks or even months to secure. Understanding the information that your potential lender may require will be key to helping speed the application process. Such information will include:
- The status and details of the planning consent
- The project type for example the mix of residential and/or commercial units
- Your finance appraisal and projected cash flow
- Your professional team including whom your contractors will be and their related experience
- Details of your history of development experience
- What other security or personal guarantees you may be able to offer
- And the exit route; open market sales projections or refinancing options
It is worth considering the lenders perspective when finding property development finance. Property development finance involves risk sharing and so banks will want to understand their risk and minimise at as much as possible. Consequently, they will want to know their facility is going to be repaid on time and in full including interest and fees that may be liable.
Lenders may choose to ask for additional security where their risk is considered to be higher and will also secure their position through a first charge on the subject site. Developers will usually have to put in their own cash and at the outset of a deal, although some may consider 100% funding. Each bank will have their own set of criteria for lending and this does mean that there are hundreds of loan products available.
There is much to challenge the life of being a builder and developer and the rollercoaster of events may sometimes seem risk adding a grey hair or two. But finding development finance can be easier that it may seem at first.
Developer Money Market is a specialist property development finance broker and independent comparison website. We can help you to quickly and easily compare property development finance lenders to find the best suited loan for your project.