| | STANDARD | ADVANCED
|
| Lender: | Various | Specialists banks and consortiums |
| Purpose: | Speculative Developments
| Spec. Devts with strong exit potential
|
| Type | Single Houses, Larg Devts. and small block of flats | Commercial
and Residential
|
Max Advance:
| 60% of land + 100% build costs (max. 75% of GDV incl. Interest) | Upto
80-90% of ALL costs
|
Loan Size:
| £100k to £4m
| £1m to No Max |
| Term: | 6 to 24 months
| Upto 24 months
|
The key to securing
finance for property development is to understand the criteria that lenders work to. If you're new to this business and
you want to know how to finance property development then please read on.
Property
Development Finance is simply a short term loan that is essentially in two parts:
The first part is a facility to help you buy the site and in most cases the lender will
advance 60% of the purchase price leaving you to fund the balance of 40%. [See limits below]
The
second part is a facility that is used to build out the project. Generally speaking the lender will advance 100% of ALL the
build costs in stages, as and when they are finished. i.e. Foundation; Wall Plate; Roof on etc. As each stage is completed
the work is certified by the lenders QS or surveyor and the funds for that stage are released for you to pay suppliers etc.
Therefore you will need to have sufficient cash flow to fund the initial stages.
Limits:
There is an overall limit to which lenders will finance property development and this varies between
one lender to another. Lenders will look to restrict their maximum loan in relation to the Gross Development
Value of the site. So whatever the total sale value is of the proposed development the maximum loan (depending on the lender
chosen) will be 50% to 65% of this figure - this is where 100% / Mezzanine Finance has a roll to play.
