Development Finance

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What is development finance and how does it work?

Development finance is a loan granted purely for the development or refurbishment of residential, commercial or mixed use properties. It is often granted to experienced builders or developers, enabling them to raise the capital to convert prospects into a commercial reality. Specialist development finance lenders will take the future value of the property into consideration when agreeing a loan.

Unlike a traditional mortgage lender, a development finance lender will take the value of the completed property into account. Here’s how the process works:

  • An application is submitted including site/property purchase costs, development or refurbishment costs, professional fees and build timescales.
  • An offer of partial terms will be made from the lender based on this information and supporting evidence.
  • Credit searches will be run on the developers existing finances, experiences and the development location.
  • Once the loan has been approved there will be ongoing monitoring of the project.

Who is development finance aimed at?

Development finance is often used by builders and developers planning extensive projects and ground-up developments. Poor credit rating will likely halt an application for development finance due to the strict application process.

When should you use development finance?

Development finance allows quick access to large amounts of capital, whilst still being a short term loan, avoiding lengthy contracts and long term interest accrual. Lenders of development finance are rigid in their comprehensive paperwork requirements, with arrangement and exit fees generally being higher than that of commercial mortgages.

Where can you get development finance?

NeoWave has had hands-on experience in finding the most flexible and professional lenders in the UK. Through this process they can place developers with the right partner without having to go through time consuming applications that come to nothing.

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