Property development finance – What you need to know
Property development finance is usually provided by specialist banks whom understand the intricacies of the building industry and tailor their funding accordingly.
Property developers will raise funding for a many different types of projects including:
- New build houses or flats
- Retail or commercial properties
- Or even leisure developments.
Whilst there are dozens of UK banks providing development finance, each bank will usually have their preferred or specialist areas of interest. For example many such lenders may only lend on residential projects.
The level of funding will also be a strong determining factor in choosing the right bank. Each lender will have their own limitations on available funds or indeed may have limited appetite for certain levels of debt funding.
However, across the sector, there is funding available from £100,000 to £50,000,000. So it is a case of focussing on those banks that will be interested in your type of project and the associated risks.
Each lender will have their own limitations on available funds or indeed may have limited appetite for certain levels of debt funding.
Understand Your Funding Requirments
You will also need to have a clear understanding of your loan to cost (the size of the debt required versus the total build costs, abbreviated as LTC). Together with the loan to gross development value (the total loan including finance costs when compared with the final value of your project when finalised, also known as LTGDV). Again, as with the size of the debt require, banks will have their individual criteria for property development finance compared to the value of the property.
There are a number of key types of property development funding which include:
There is funding from £100,000 to £50,000,000, so it is a case of focussing on those banks that will be interested in your type of project.
Aside from the assessment of the numbers relating to your project, lenders specialising in property development finance will also want to know your level of experience. This will mean having a detailed explanation of your real estate development track record including a detailed breakdown of what you have developed and how it compares to what you want new funding for. For assistance on how to prepare your application for property development finance then read our guide and have your homework ready.
Developer Money Market is an independent property development finance broker and comparison website that is designed to help property developers instantly search online for funding. We make comparing property development finance lenders simple.