Property development finance is a type of loan used to finance the conversion, construction or refurbishment of properties. It is usually set up as a short-term loan to finance the project only during the build.

Popular reasons include:

• Construction

• Conversion

• Refurbishment

We are experts in presenting development projects in the best light to lenders helping you achieve the best terms. When packaging a development case, we always look to address the following:

• Experience – For a lender the developers experience is key to the deal. We go to great lengths to explain the background experience of our client to lenders. If you are a first-time developer then we will need to concentrate on the strength/experience of your contractor.

• Business plan – We provide working business plan templates for you to complete. These break down costs, show time-scales for each stage, and realistic end valuations, which lenders are expecting to see. We even sense check the figures for you!

Lenders like the developer to put down a substantial value of the land as a deposit. If the land has planning permission most lenders will require a borrower to put down a 40% deposit, some will accept 35%. If the land does not yet have planning permission then the lender needs to decide what the chances of getting planning permission are, and what would happen if planning permission wasn’t achieved. If they were comfortable with the risks, they may still lend at 60% to 65% of the purchase price. If they were not comfortable, they would reduce their exposure substantially and perhaps lend only 30% to 40% of the purchase price.

Once the loan is approved, the lender will appoint a professional surveyor. They will visit the site prior to each major stage, check the work has been done to the required standard and approve the release of the next tranche of funds to complete the following stage. We have a number of lenders who will fund 100% of the build costs, subject to a situation where they advanced no more than 60-70% of the gross development value (GDV) of the project at any time.

Once a development is completed the development loan will either be repaid through the sale of the units, or by arranging a term mortgage. The term mortgage is based on the final gross development value (GDV) of the project.

If the actual of estimated rental income (according to a local estate agent) is high enough a developer should be able to release up to 70% of the GDV of the project. This should repay all the funds used in the project, and potentially release some profits.

If poor cash flow is restricting the purchase of future development plots then it may be wise to release equity prior to the completion (or sale) of the project. We have a number of lenders that will allow equity to be released, whilst final touches are being made, or units are being marketed and sold. Sometimes this can mean that your workforce can move straight onto the next site without a gap in work.