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What is Development Finance?

June 2016

Development finance is essentially a loan that goes towards the purchase of land/construction costs of a development.

Property development is never easy, but there is no reason why finding finance for it can’t be. If you’re a property developer, investor, or landlord, then there’s a range of finance options available, that will enable you to get your next project off the ground.

If your project consists mostly of light to heavy refurbs, you may want to consider a ‘refurbishment bridge’. A refurbishment bridge funds 3-24 months of building costs and sometimes comes with the option to convert into a mortgage later down the line.

For more extensive projects, such as ground-up developments, you can find financing options that will cover both land purchase and building costs. For example, if a developer wants to buy a plot of land in Suffolk for £100,000, and spend another £500,000 on the construction of a quaint country cottage, a lender might finance 50% of the plot purchase and 70% of the build. In short, this means the property developer would only need £200,000 of their own money, instead of the total £600,000 needed for the project. Of course, all this depends on the lender rates and the bespoke structure needed.

Interest can be rolled or paid monthly. Flexible repayment dates can be agreed to suit sales timelines, and most exit fees are calculated on the borrowed amount, not the GDV (Gross Development Value).

Aston Shaw now has a new, in-house corporate finance department which can assist you in finding suitable finance. We can also look to help less experienced developers and even impaired credit applications can be considered. If you would like to speak to a Corporate Finance Specialist, contact us for a free consultation!

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