Frequently Asked Questions

FAQ

A finance facility, be that a loan or a joint venture, to fund either ground up builds or conversion projects.

In the main, housebuilders and property developers who are looking to add value to land or property.

Development finance is released in stages in line with the build / development process. Most development finance lenders will offer an initial loan based on the purchase price. The lender will subsequently fund 100% of the cost of works. This ensures that the works are completed, and the development is finished and ready to be sold or refinanced.

Property developers and housebuilders. This can be either a person undertaking their first project, a larger commercial housebuilder or a property company with experience and a track record in successful property development that is looking to expand into larger builds and needs to secure capital to fund more ambitious projects.

No, but your team does. Experience is one of the most critical questions asked by any finance provider. If you are a builder, a tradesperson, an architect for example, someone who works in the construction industry and has an overview understanding of the development process and associated costs, this will certainly help. Most finance providers however will want evidence that you’ve been party to the entire process i.e. experience in purchasing land/property through to successful sale/refinance. If this is your first project, where you’ve not taken a project through from start to finish, not to worry, there are finance providers that can assist but their cost of funds will be slightly higher.

Yes we can assist however please see above point re experience. The finance provider will instead assess the experience your team / who you will be appointing to undertake the build or conversion.

Finance terms are provided based on your individual requirement. A smaller house build may only require 12 months opposed to a larger scheme that may require 18 months to account for the sales period. Development finance is a short-term requirement with terms normally between 12-24 months. Short term finance in general can start from 3 months to 36 months.

We have access to the full range of funding available which includes senior debt, stretched debt, mezzanine finance, equity funding and joint venture set ups. It very much depends on your goals as to how you wish to capital stack.

We work with a full range of providers from high streets, challenger banks, alternative niche private lenders, high net worth individuals and sophisticated investors. The latter are, in the main, off market. They all have different risk appetites and funding structures as noted above.

We can assess your overall development appraisal and look to release equity tied up in your security which can then be used to start stage 1. Lenders will then release further funds once stage 1 is complete, enabling you to move onto stage 2.

You will only pay interest on the monies you actually draw.

A big part of the lenders’ assessment is on experience so if you don’t have any personal experience, not to worry, lenders will assess who you will be appointing as your main contractor and/or project manager.

As much as we would love to provide a definite answer, this is unrealistic to do so without knowing your individual situation and project. We do offer a free ‘route report’ for smaller projects requiring a loan under £1 million. This report provides an analysis of where you sit in the lending market and potential loan terms/costs.

With development finance, most senior lenders support at 60-65% LTGDV. Mezzanine finance can be used to top-up the senior debt funding. As an example, for a ground-up development, the maximum gearing can reach up to 75% LTGDV (capped at 90% LTC) meaning the developer will have to inject only 10% of the costs as equity.

Other potential fees you will need to account for are a lender arrangement fee and/or exit fee, a valuation, the lender’s legal fees, any QS or MS fees, our broker fee and a fee levied by the Land Registry to redeem the lender’s first charge on completion.

Yes however in some instances the finance provider may require a minimum period. If repaid within this minimum period, either the interest will still be payable or an early repayment charge can apply.

For senior debt, the lender will have the first legal charge over the land/property and therefore has the right to repossess. In the main, dependent on the lender’s funding lines, this measure will only be used as a last resort. They will work with you to find acceptable repayment methods. Alternatively, dependent on how many further months you need to extend and your pipeline projects you may be able to seek a development exit loan instead.

Dependent on what is available and how you have structured your capital, senior debt will require a first charge on the land or property compared to mezzanine finance which will require a second charge facility. Equity finance holds the most risk and therefore the most expensive form of finance as generally no security is available. There will often also be a requirement for a debenture and a personal guarantee on a case-by-case basis (at a minimum a guarantee to cover cost overruns of the project). Additionally, if you require a mezzanine lender, a deed of priority or intercreditor agreement would need to be agreed and executed by both the senior and mezzanine lender.

For any development project, all lenders will require:
  1. Proof of full planning permissions
  2. A break-down of your experience or confirmation of who will be the appointed main contractor (experience document see below *)
  3. A build schedule and break-down of costs (including a contingency)
  4. A development appraisal
  5. A break-down of your personal assets, liabilities, income and expenditure (ALIE schedule)
  6. Proof of ID, home address and 3 months bank statements (some lenders may request certified copies and/or use of their third-party ID checks facility which is emailed to you directly to complete)

We can provide templates for many of these areas. Please email us if you would like a copy. *An ‘experience’ document (or a CV), should include details of your company, how long you have been trading, details of your previous projects including pictures before and after, brief descriptions of the work completed, the amount of value that was added. As your team will most likely be delivering the project, the lender will also require details of your team (main contractor, project manager, quantity surveyor), similar to your details including their previous experience and the projects they have completed. This document does not need to include typical CV type info such as education background unless you feel it is relevant to showcase your property related skills/experience.

Yes you will require FULL planning permission in order to access development finance. If you are purchasing land or property without permissions, you can access a bridging loan which can be refinanced onto a development finance facility upon full permissions.

These are normally the Profit on Cost, Loan to GDV, Loan to Value and Loan to Cost.

We are happy to review the market for you in line with your goals. Do assess any offer for finance very carefully – they are often very complicated and may include hidden fees.

Yes, you will be able to use your own solicitor and it’s often recommended to choose one local to you as it can be easier when there are signing of documentation requirements dependent on lender and funding agreement. It’s also normally advised to use e a Solicitor’s Firm with at least 2 SRA Partners and ones with a good track record in property development type transactions.

Development projects in a variety of asset classes, the most popular being the residential market (houses and flats). Other asset classes includes: commercial, student housing, healthcare, infrastructure and light industrial.

In the main yes. They recognise the effort and cost that goes in to preparing and achieving planning consent for a project and as such are able to consider planning gain as part of the equity contribution.

We can arrange finance for any development located in England, Wales and Scotland.

Our service is purely for business purposes. We are unable to provide finance using your home residence as security. Please note this is a regulated activity per the Financial Conduct Authority (FCA) so an authorised individual or firm will be required.

As above, unfortunately we are only able to assist with business ventures (property developers and housebuilders looking to sell or refinance for a profit or income). A self build is deemed as a regulated transaction as the intention is for you to personally move into the property once it’s built. We do have an extensive network who we can introduce you to for transactions like this. Please ask and we’ll be happy to put you in touch.

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