All development finance products are unique. There’s no one lender that fits every scenario or client. After all, that’s how they compete. Each product is tailor-made. It is designed specifically for the development project, the client profile and the lending appetite for their proposed scheme.

You can use a development finance loan for numerous purposes, including: 

• Developing residential property.
• Developing commercial or semi-commercial property.
• Property refurbishment, conversion, or renovation. Although in these cases, a bridging loan might be a better fit.
• Scaling a single-unit development up to a large multi-unit scheme.

The amount of development finance funding you can receive depends on the outcome of the red book valuation report. This takes into account the property’s current value before the works start. It also considers the build costs and the GDV or Gross Development Value (the value of the property after its completion). 

All lenders set their own parameters for lending to determine the maximum amount they can lend. 

I would ask your broker how quickly can the lender get the deal done.

Lenders charge interest and fees on the loan. The total amount of charges will depend on:

• How much you borrow.
• The length of term of the loan.
• The percentage that you are borrowing compared with the overall cost of the project.

Typically, development finance loans last for up to 6 months – 36 months (3 years). But this depends on the development. You may only require a straightforward loan for a refurbishment project for six months. However, a more complex development could require a loan over a period of five years (60 months). The loan’s term allows sufficient time for the purchase of the property, its development, and then its refinance or sale to pay off the debt.

• Borrowers can repay a development finance loan in a few ways. They can: 

  • Repay the loan over time when the site is complete, and the properties are sold.
  • Pay off the entire amount using the proceeds from selling the completed property. 
  • Refinance the property with a long-term loan. This allows the borrower to either rent out the property or keep it for themselves. Typically seen on build to rent schemes.
  • Refinance with a development exit loan. This could allow the release of profit and much lower rates of interest allowing sufficient funding for another project without needing to wait until the current development property is sold. 

All lenders set their own criteria as to which documentation they require. However, the key documentation you will need includes: 

• Details of any planning permission as well as any drawings together with section 106 and CIL payments.
• A full breakdown of the costs involved in the project. 
• Details about your development experience as well as examples of any previous projects that you have completed. 
• A schedule of works broken into phases and milestones.
• Information about your contractors, architects and other professionals involved in the project. 
• A comprehensive list of your current liabilities and assets together with your project expenditures through the project’s lifespan. 
• Your proposed development exit strategy. 
• The projected gross value of the development once complete. 

Obtaining professional advice is crucial if you are considering taking out a development finance loan in order to determine whether this type of financing is suitable for you.

The process of obtaining development finance is as follows: 

The first step is to make an initial enquiry. Initially, a site appraisal is required for our analysis. If we think we can help you, we will then move forward to onboarding you as a client. This involves obtaining:

• A copy of your credit file.
• Your CV.
• Personal bank statements for the last 3 months 
• Business bank statements for the last 3 months.

We will identify a target lender for the scheme and you. The lender will then carry out due diligence internally. 

This comes down to a few factors. For example, if you are building out of the ground, then a Development Finance facility is a better fit. If you are acquiring land with no planning then use a Bridging Loan, this would be a better product. You could acquire land with a Bridging Loan and then once you have gained planning consent then setup Development Finance facility.

Property developers use a Bridging Loan For Property Development when they own the site cash and then require funds for the works in order to complete the project and use the security (property) to raise the funding against. This all depends on the scale of the scheme and funds required to developer. It’s worth a call with an advisor to get a better answer to this question. As everyones circumstances are different.

Community Infrastructure Levy (CIL) may be payable for developments which involve the creation of new home. It may also be payable for developments with an internal floor area of 100 square metres or more. This may vary from each council in the country.

Under S106 of the Town and Country Planning Act 1990, as amended, contributions can be sought from property developers towards the costs of providing the community some type of social infrastructure as part of the planning application. This is commonly known as a ‘Section 106‘ and will support an applications viability with a local authority.