Development Finance

Below is the standard list of information a bank would expect to see for a development deal.

We need an overview of the deal. This will include the following items:

Full details of the property – address, sales particulars, photos
How the property was sourced – estate agents, auctions, personal contact etc
Outline of what you are proposing to do – as much information as available at this stage, so may include drawings and planning consents etc
Source and amounts of cash contributions from the borrower
Name of legal entity that is buying the property – details of all directors, shareholders and their percentages
Experience of the directors – brief CVs highlighting any experience relevant to the proposed project
Schedule of assets and existing properties owned by the directors/shareholders

Purchase price

Build costs

Anticipated GDV

This information is usually sufficient to gain interest from a lender

Specialist Commercial Lenders

- 70-75% of land purchase

- 70-75% of build cost

- Total loan cannot be more than 65% of Gross Development Value.

These lenders tend to lend in the range of £500k to £10m – ideally, we need to see 3 similar projects completed in the last 3 years.

Pricing

1.5% arrangement fee: interest charged at 7% per annum; exit fee is 1% of GDV

Private funders

- 80% of land purchase

- 100% of build cost

- Total loan cannot be more than 70% of Gross Development Value and 80% of total project costs, whichever is the lower.

Can lend up to £50m and will consider larger projects, depending on who the applicant is and the nature of the project.

Pricing

2% arrangement fee; interest charged at 8% per annum; exit fee is 1% of loan amount. Although more expensive than the banks, these funders are quick and efficient and subject to few lending policy restrictions

Builder’s Fund

- 70% of land purchase

- 100% of build value

These funds come from a successful semi-retired builder so, if he likes the project, funding is quickly made available. Completion in 7 days is possible.

Pricing

Arrangement fee; interest is charged pa; exit fee is 2% of loan amount.