Development Funding in Scotland

25th April 2023
Posted by: DMM
Category: Development Finance

Property developers north of the border have some wonderful locations to choose from and we are always delighted to help with sourcing development funding in Scotland. In recent years we have found funding for developer clients seeking facilities from £250,000 to more than £18 million and so we have strong market knowledge.

The range of development loans for Scotland is more limited as the different legal system, as well as the possibility of future political independence, deters some England based lenders. Many lenders will have a strong preference for sites near larger towns and cities as demand will be higher than in more remote areas.

How Does Development Funding in Scotland Work?

As with development funding across the United Kingdom, development funding in Scotland will follow the same financial structure.

Scottish Lender Criteria

Loan to Value – Typically 60 – 65% but up to 75% is possible
Loan to Cost – Typically 80 – 90%
Loan size – Typically £50,000 upwards
Maximum Term – Typically 6 months but up to 36 months is possible
Ideally good experience relating to the subject project however can secure funds for first time developers using a strong contractor
A PG will typically be required

Property developers north of the border have some wonderful locations to choose from and we are always delighted to help with sourcing development funding in Scotland

Scottish Lender Lender Fees

With each property development loan, there are a range of fees that will apply. These fees will include:

Arrangement fees – These will typically be between 1-2% of the facility
Interest rates – From 9.5% (based on lenders base rate plus BEBR) but will depend on many factors
Valuation – Each lender will need to have a formal valuation of the land. The cost of a valuation report is paid by the borrower and the cost will usually depend upon the size of the project
Professional fees – Lenders will appoint or have their own Monitoring Quantity Surveyor (QS) to oversee a construction project on their behalf and approve drawdown requests. These fees will vary but are likely to start at £450-£1,000+vat per visit
Exit fees – Upon the final repayment of the property development loan, an exit fee will usually be liable to the lender of around 1-2%. This is usually calculated against the facility amount but borrowers should note whether this is being calculated against the GDV