How to Raise Stretch Funding
The market for good development sites is competitive and knowing how to raise stretch funding quickly will be important to successfully achieving your acquisition.
Raising stretch finance can offer developers an opportunity to spread available cash equity with leverage of up to 90% loan to value. The high street banks (also referred to as senior lenders) offer development funding but often with a limit to their risk of around 60% of the development costs (these may include the land cost, construction costs, professional fees, etc).
If the developer only has cash to cover another 10% of these costs then there is a bridge to gap through mezzanine finance.
So this is fine, you as a developer can approach a high street bank for the bulk of you funding and then a secondary lender for mezzanine funding. An alternative, however, can be raising stretch funding through specialist bank that will offer a combined facility.
The benefit will be having a quicker process with one bank to deal with and, accordingly, less administrative costs.
Raising stretch finance can offer developers an opportunity to spread available cash equity with leverage of up to 90% loan to value.
If you are considering how to raise stretch funding then there are often a range of factors that you will have to consider. Including:
- Usually, but not always, you will have to prove that you have 10% of the build costs in equity of your own
- Most stretch finance providers will expect you to demonstrate a successful track record in property development.
- Some stretch finance providers will limit their lending to geographic areas. This might be close to their office base, within areas they consider are saleable or perhaps simply excluding areas such as Scotland where the legal process is different.
- Another key element to consider when looking at how to raise stretch funding will be to check that your finance provider will accept your type of development. For example, some stretch finance providers will not consider commercial projects, retirement schemes, purpose built student accommodation, etc.
The secret of how to raise stretch funding will include being honest, detailed in your approach to providing information, concise and presenting well.
How to Raise Stretch Funding without a Broker?
Going direct to a stretch finance provider is usually straight forward but can be time consuming finding and contacting the various different lenders. When approaching a lender direct it should be done with careful attention to providing the right information. When considering how to raise stretch funding it is also important to consider how you present this information too. Get the balance right with enough relevant information and presented in a professional format will be very important. As part of how to raise stretch funding we will be looking soon at Ten Tips for Raising Development Funding.
The secret of how to raise stretch funding will include being honest, detailed in your approach to providing information, concise and presenting well. Do all of this and you’ll be on your way to successfully raising stretch finance!
Developer Money Market offer a unique and innovative service where property developers can quickly and easily search and compare stretched senior finance lenders. Upon finding suitable lenders via our system, you can apply for finance from one or multiple lenders with just a one click application.
Developer Money Market will then professionally package your deal and present it to the lenders you selected, saving you time and money.