FIVE Ways in which you can obtain 100% Development
Finance for Your Project
- Where a site has benefited
from a planning gain so that the purchase price is much less than its' value
then the project may secure 100% finance all at standard rates.
- Also
if the site is owned outright by the developer or another person or body as
part of a joint venture contract then again this is likely to secure 100% finance for the build out.
- Where additional security is offered to support a loan, which
some lenders will accept and some won't, then the lender may be in a position to advance 100% of all costs.
- It is possible to re-finance a project where the existing lender
needs to pull out for it's own financial reasons. Where this occurs the lender will often agree to a settlement figure
below the debt owed which can create sufficient equity to allow a re-finance at 100%.
- Where
a project has the right blend of profit and achievable sales then it is sometimes
possible to arrange up to 100% of ALL costs (land + build) by way if a 100% loan or Mezzanine (top-up) Finance however it
is understandably more expensive.
100% Finance for
pre-sold Developments
- These will typically include Housing Associations,
Student Accom, Hotels etc
- 100% of all land and build costs available
- Usually requires 50-60% of Development being pre-sold
- Funds available
from Private Equity Firms, Corporate Lenders or Consortiums
- Loan size up to £30m
- more for the right deal
- Rates and terms vary depending on strength of deal, developers
experience etc
- Best terms are 4.5% over base with a 10% profit share
NB. The due diligence for some of these funders is expensive so is likely to suit
financially strong, experienced applicants only
There are usually two types
of funding - one is where one funder advances all the monies required - the other is known as Mezzanine Finance
which is essentially top-up finance. With Mezzanine Finance the first 80% of all costs (known as the senior / primary debt)
is supplied by a lender such as a High St., bank and the top-up finance sits behind it.
Securing either
of these funding options is not easy and a lot will depend on the type of development, location and the level of pre-sales
if any. A good example of a scheme that would secure this type of finance is a pre-sale to a Housing Association.
The cost of funding varies from funder to funder. The Mezzanine finance (see top-up finance/mezz finance) is usually charged at 2% per month (usually rolled up) on the amount of
the top-up loan provided. With 100% finance provided by one funder then the cost usually equates to 10-50% of the profit depending
on the level and strength of pre-sales etc.
