What is development finance?
Development finance is a form of financing that provides funding for large-scale property projects, such as property development, conversions, renovations, and regeneration projects. It is not available for smaller property developments, such as home renovations.
Compared to traditional mortgage applications, development finance is typically available much faster, with a short repayment period ranging from six to 24 months. This ensures that your client is not burdened by debt for an extended period. Unlike regular loans, monthly payments aren’t usually required. Instead, the interest on the loan is added to the capital borrowed, and the total amount is paid back in a single payment at the end of the term.
Development finance criteria
When applying for development finance, the maximum loan amount available is based on the gross development value (GDV) of the completed project. The GDV refers to the estimated value of the property development once it has been completed. Typically, lenders will provide up to 70% of the GDV and 75-80% of the total costs of the project.
It’s important to note that the loan amount available will depend on the lender and their specific criteria. They will assess the viability of each project, including factors such as location, market demand, and potential return on investment. They will also consider previous experience as a property developer, credit history, and the level of risk involved in the project.
Specialist Finance Centre’s approach to development finance
If your client is a property developer in need of financing for their next project, the team of development finance experts at Specialist Finance Centre is here to help. We have extensive knowledge of the development finance market and access to a wide range of lenders, which allows us to find the best deal for your unique needs.
Prior to entering into a project, we offer advice on strategy, structure, funding options, and risk management, ensuring that you have a solid plan in place before starting construction. Our goal is to make the development finance process as smooth and straightforward as possible. We understand that securing funding can be challenging, especially for new developers.
