Property development finance
Development finance is a short-term secured loan facility to finance property construction, conversion, or heavy refurbishment.
It’s an essential tool for property developers who don’t want to tie up all of their cash-flow in projects.
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What Can Development Finance Be Used For?
Property dev finance can be used for a variety of purposes and can adapt to the different stages of larger projects.
Land Purchase
Acquiring the land necessary for the development.
Construction Costs
Covering the expenses of building or refurbishing the property.
Professional Fees
Paying architects, surveyors, and other professionals involved in the project.
Planning Permission Costs
The fees associated with obtaining planning permission.
Infrastructure Costs
Connecting utilities and creating access roads.
Contingency Funds
A buffer for unexpected costs that may arise during the project.
What is the difference between bridging and development finance?
- Bridging loans are better suited to short-term needs and time-sensitive situations where quick access to funds is essential.
- Development finance is used for larger-scale projects with a longer timeline, offering phased payouts and greater flexibility.
- Interest rates for bridging loans are higher than those for development finance, but the total cost will depend on the loan amount, duration, and additional fees.
Development Project Types
These are the three main types of development projects, each requires a different style of finance package.
Light Refurbishment
Light refurbishment projects are often the most straightforward and accessible for new or smaller-scale developers. These projects involve cosmetic upgrades and non-structural minor improvements to an existing property.
This could include:
- Redecorating: Painting, wallpapering, and updating fixtures and fittings.
- Kitchen and bathroom upgrades: Installing new cabinets, countertops, and appliances.
- Flooring: Replacing carpets or updating flooring materials.
- Landscaping: Improving outdoor spaces to enhance the property’s appeal.
Light refurbishments can often be completed quickly and with a relatively small budget. They offer a great opportunity to add value to a property without undertaking major structural changes.
explore Refurbishment FinanceHeavy Refurbishment
Heavy refurbishment, renovations, and conversions involve more substantial changes to an existing property. These projects can range in scale and complexity, from remodelling interiors to completely transforming a building’s use.
Examples include:
- Structural alterations: Knocking down walls, extending the property, or adding new floors.
- Major systems upgrades: Replacing plumbing, electrical wiring, or heating systems.
- Change of use conversions: Transforming a commercial building into residential units or vice versa.
- Restoring historic properties: Preserving and updating older buildings while maintaining their character.
These projects require more significant investment, expertise, and time to complete. However, they can also offer the potential for greater returns on investment by adding substantial value to a property or creating multiple units from a single building.
explore Refurbishment FinanceGround-up Development
Ground-up development, also known as new build, involves constructing a property from scratch on a vacant plot of land. This can range from building a single house to creating a large-scale residential or commercial development.
Ground-up projects offer the most design freedom but also come with their own set of challenges, such as:
- Obtaining planning permission: Working through the planning process and ensuring the development complies with regulations.
- Managing construction costs: Budgeting for materials, labour, and unexpected expenses.
- Coordinating multiple contractors: Ensuring efficient collaboration between architects, builders, and other professionals.
- Marketing and selling: Attracting buyers or tenants once the development is complete.
These projects require significant financial resources and expertise, but it offers the potential to create a property that perfectly meets the developer’s vision and the needs of the market.
Short-term finance and development finance both need to be repaid before the agreed term ends. This is your exit strategy. Common ways are to sell or refinance/keep. Our article Exit Strategies for Property Developers explores some alternatives.
Commercial projects such as office blocks, retail spaces, industrial or warehousing would need Commercial Development Finance.
learn moreResidential projects that could include single or multiple dwellings will need Residential Development Finance.
learn moreLet’s talk development finance!
Who can borrow?
Applications can be made by:
- Individuals
- Partnerships
- Limited companies
- SPV
- Trusts, Expats
It’s common for developers to borrow through an SPV (Special Purpose Vehicle). An SPV is usually a limited company and is set up just for that project and for that loan.
Using an SPV does not negate the need for personal guarantees from the directors/shareholders of the SPV.
Development finance is available to first time developers but the rates tend to be a little higher.
Nearing project completion? Discover how development exit finance can boost your returns and fund your next venture.
Our guide explains how this flexible funding option can lower your interest rates, extend your sales period, and release vital capital.
Whether you’re facing unexpected delays or simply want to optimise your project’s profitability, development exit finance could be just what you need.
Learn how to transition smoothly from traditional development finance and maximise your project’s potential.
explore development exit financeWhat can we offer?
Developments come in all sorts of shapes, sizes and values.
Luckily there’s lots of variations of development finance to cater for these, below are just some of the finance packages we can offer.
Give us a call on 0330 030 5050 and our brokers can talk you through the most suitable option.
