PROPERTY FINANCE - development finance
Get development finance
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100+ UK business lenders
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What is property development finance?
Property development finance is a form of short term funding to support and fund development projects, either in stages or as one lump sum release. This creates a flow of cash into your project as and when you need it most. Whether you are looking to develop a residential, commercial, or mixed use project, development finance can help you take that step.
Development finance typically requires risk assessments and using the property being developed as collateral for the loan. Development finance also comes with interest rates and terms that vary based on factors such as project type, the level of developer experience, and the strength of the business’ credit score.
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How does development finance work?
Development finance can be adapted to provide you with access to a fixed lump sum, or instalments paid in stages. It helps you to keep on top of your budget whilst potentially giving you the flexibility to borrow more should additional costs arise.
Development finance typically lasts for just 12 to 24 months and is usually repaid on an interest only basis, plus any arrangement fees which are agreed with you in advance. This is particularly beneficial when it comes to preserving your working capital as the total amount borrowed will be repaid at the end of the agreement when the sale is eventually made.
Who is development finance for?
Development finance advantages and disadvantages
Advantages of development finance | Disadvantages of development finance |
|---|---|
Development finance provides access to the significant capital required for land acquisition, construction, and development costs. This allows a business to undertake larger and more profitable projects than they could with their own funds. | Development finance typically comes with higher interest rates and fees compared to long term options such as a commercial mortgage. |
Developers can leverage their existing capital by securing property development finance, allowing them to spread the financial risk across multiple projects and potentially achieve higher returns on investment. | Property development can be a risky industry, so if a project encounters unexpected issues, it can lead to financial losses and developers may be personally liable for repayment of the loan. |
Property development finance can be structured to match the project's timeline, with flexible repayment terms that align with expected cash flows from the completed development. | Securing development finance can be more complex to obtain compared to a business loan. |
Developers can diversify their property portfolio by taking on a variety of projects, such as residential, commercial, or mixed-use developments, using property development finance. | Lenders typically require a certain loan to value (LTV) ratio, which means developers must contribute a significant amount of equity upfront. This can limit the number of projects a developer can undertake simultaneously. |
Successfully executed property development projects can yield substantial profits, making development finance an attractive option for developers seeking higher returns. | You will be required to meet the repayment obligations of property development finance, which can put pressure on project timelines and cash flow if the project encounters delays or cost overruns. |
What do I need to apply for development finance?
To apply for development finance, it’s likely you will need the following:
You will also need to provide the following documents:
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How much can you borrow with development finance?
How much you can borrow from a property development finance lender will depend on a percentage of the Loan to Gross Development Value (LGDV) and the loan to cost ratio (LTC).
The amount can vary depending on the lender and the project, but typically you could look to borrow:
Access the financial resources needed to support your next development.
Why use property development finance?
Specialist Lenders
By working with a specialist commercial property development finance partner, you'll be able to take advantage of their experience working with single unit projects and larger, multi-unit schemes. Many are able to offer highly favourable LTV ratios, with flexible, contactable decision makers on hand to carefully assess each individual application.
Tailored Financing
Each business loan for property development is carefully structured around the timeline of each project. Your lender will work with you to understand core facets including building plans, costs, estimated profit and timescales to create an affordable repayment schedule with dedicated customer support every step of the way.
Adaptable, Flexible Loans
From ground-up developments to light refurbishments, commercial property development finance can be used for a wide variety of property investments. They're great for borrowing over the life cycle of the development, giving you plenty of time to complete your build and sell or rent it out for profit.
Get your development finance with Capitalise
Almost every development finance, bridging loan or commercial mortgage can be adapted to provide you with access to a fixed lump sum or instalments paid in stages. It helps you to keep on top of your budget whilst potentially giving you the flexibility to borrow more should additional costs arise. Development finance typically lasts for just 12 to 24 months and is usually repaid on an interest only basis, plus any arrangement fees which are agreed with you in advance.
This is particularly beneficial when it comes to preserving your working capital as the total amount borrowed will be repaid at the end of the agreement when the sale is eventually made.
Sign up with Capitalise today and browse a large selection of specialist property development finance partners who can help you to quickly and easily access the funds needed to take on your next project.
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Ready to start your next development project?
Apply for development finance today.