Securing Finance for Development Projects
02 September, 2021
Residential and commercial development projects typically call for the kind of funding that goes beyond conventional loans. In the UK, there are various specialist facilities available for all types of property development and construction projects. Each with its own intended applications and potential benefits to consider. Prior to applying for any type of development finance, it is essential to enlist independent broker support. Many of the UK's most dynamic specialist lenders exclusively accept broker-introduced clients, rather than those who approached the lender directly. This subsequently means that the best deals on most types of property development finance can only be accessed via an established broker.
Working with a broker can also be helpful for establishing your eligibility and determining the most appropriate source of funds, before applying.
What Types of Funding Options Are Available?
There is a surprisingly long list of funding options to consider for such projects, which vary by way of accessibility, affordability and appropriateness for purpose.
For example, commercial mortgages are a popular option, which work in a similar way to residential mortgages. A commercial mortgage offers the flexibility of a repayment period of up to 25 years or more, which can help spread the costs of larger loans. Deposit requirements start from around 25% and up for a commercial mortgage, though lower rates can be negotiated with some specialist lenders.
Bridging finance can be a uniquely cost-effective option for short-term borrowing. If the applicant can afford to repay the loan in full within a matter of months, a bridging loan can offer unbeatable value for money. Monthly interest rates typically hover below 0.5%, with minimal additional borrowing costs. Furthermore, bridging loan completion times are typically two weeks or less - ideal for covering urgent and unexpected costs.
Specialist development finance products are a viable option for more extensive projects with higher overall costs. With development finance, the funds provided by the bank are released in stages as the project progresses. The bank hires a surveyor to evaluate the progress of the project, releasing each subsequent instalment if satisfied the work is going as planned.
Mezzanine finance provides construction companies and developers with the opportunity to source funds from multiple lenders. With mezzanine finance, an additional loan is taken out on top of the primary source of funds from the main development finance provider as a second charge loan. This facility is usually only open to experienced developers with an established track record.
Establishing Eligibility and Appropriateness
Along with the above, independent providers across the UK offer a wide range of bespoke secured borrowing solutions to suit most requirements. The more dynamic lenders on the market are often willing to tailor the products and services they provide, in accordance with their clients' projects.
Once again, the importance of independent broker support cannot be overstated. Working with an established broker holds the key to both selecting the most appropriate product and getting an unbeatable deal from a reputable lender.
For more information on any of the above or to discuss your requirements in more detail, contact a member of the team at UK Property Finance today.
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