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

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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.

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