What is Senior Debt Development Finance?

Senior debt development finance is probably the most common type of funding with an established range of specialist lenders offering products.

Mostly used for residential projects, senior debt development finance lenders will typically provide from 55% to 80% of project gross costs (including finance interest and fees).  Naturally, this requires the developer to have a substantial equity contribution of their own although this can also be supported through other investment such as mezzanine finance.  Specialist lenders such as Octopus, Barclays or Close Brothers will each have their own appetite for property development projects.

The cost of senior debt finance will vary from lender to lender but typical terms will include:

  • Arrangement fees of 1%
  • Exit fess from Nil to 1%
  • Annual interest rates from 4%
  • Terms will range from 1 month to 36 months
  • Facilities from £25,000 to £150 million

These rates will vary also depending upon the LTV, geographical location and whether additional security or personal guarantees are provided.

Each lender will have their own individual appetite for deals and this may include geographical preferences, however, there are lenders for throughout the UK

Lender criteria for senior debt development finance

Each lender will have their own individual appetite for deals and this may include geographical preferences, however, there are lenders for throughout the UK.  What will be common to all senior debt development finance will be a requirement for first charge security, full planning consent in place and the more experience a developer has, the better the rates are likely to be.

Applying for Senior debt finance

There is a common set of information that a lender will wish to receive when considering providing a loan and you should prepare the following:

  • An appraisal of your headline costs (these do not need to include financial costs)
  • Copy of the planning consent
  • A set of drawings for the proposed development
  • A formal valuation report (if available) and/or an estate agent marketing appraisal together with comparables
  • Details of the contractor and professional team
  • A statement of assets and liabilities

As well as opening doors to potential lenders, Developer Money Market will assist property developers in putting together a professional presentation package.  Property developers can search online and compare senior debt development finance instantly here.  For further guidance then just email us at [email protected].

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