Commercial Development Finance

How you can finance your property development

If you are embarking on a property development project the chances are you will need finance. If that is the case there are a number of lending solutions available which will allow you to fund your activity.

Here at First Nationalwe have a dedicated team of experts who can help you to secure loans for a wide range of investment scenarios such as the redevelopment of commercial or residential premises or for renovations, conversions or refurbishments. In addition we can help you to arrange mortgages, loans and finance to buy land, speculative properties or to underwrite the cost of a new build. If you are looking to refinance an ongoing project, we can help you do that, too.
 
How a property development loan can free up funds

By borrowing against the increased value of the site you can achieve as much of 100% lend to value, depending on whether or not you have planning permission and if so, whether it is full or outline. Interest payments can be postponed until the end of the project and regular drawdowns can be agreed up front for small projects, for example, against invoices - larger undertakings will require a site visit by a quantity surveyor. Drawdowns are made in arrears and usually pay out within 48 hours of request.
The loan to values achieved and interest charged will depend on the details of the project and your experience.

What types of finance are available?

There are, essentially, 4 tiers of property development loan which are discussed below. These are most suitable for larger projects which are "ready to go" with full planning permission, project plans, cash flow projections etc in place. If you have outline permission we can also help you but these are more specific - please give us a call to find out more. We will find and recommend the lowest cost option from one or more tiers depending on what you want to achieve.

1. Senior Debt Loan

A senior debt loan usually covers the first 70-80% of loan to value although it can be arranged against gross development value. As with property development loans, interest payments can be deferred and regular drawdowns can be agreed in advance for small projects.
Expect to pay arrangement fees, monthly interest at bank base rate plus 2% to 4% and in some instances, exit fees.

2. Mezzanine Loan

A mezzanine loan is a second charge loan on top of the senior debt loan, hence the name "Mezzanine". This is similar to a short term bridging loan and they are are often used in a similar way, for example to fund costs on one property while a developer's financial resources are tied up elsewhere. Since they are higher risk you should expect to pay monthly interest rates in the 2% to 3.5% range but you can achieve loan to value of as much as 90-100%.
A lower interest mezzanine loan is also available at rates of up to 2% but the competitive rates are offset, at the end, with an exit fee or a profit share agreement based on the gross development value.

3. Joint Venture 100% Finance

If you are short of cash to develop a larger project it may be eligible for 100% funding on a joint venture basis. We can team you up with an experienced partner who will underwrite the project and share the profits with you on completion.
We can also arrange mezzanine or senior debt finance for the partnership.

4. 100% Property Development Finance

If your project is a UK development requiring upto £5m we can offer bridging rate type finance or an exit fee based option without the need for a "profit share", subject to certain criteria. Profits need to be above average to secure this type of finance so we recommend you contact us to discuss your requirements.

Key features and benefits of property development loans

• Finance can cover land purchase costs, site & infrastructure costs, build costs and even marketing costs.
• Funds are available to draw down monthly in arrears, when you need them for your property development.
• Interest charges agreed at the outset; these can be variable or fixed depending on circumstances.
• Loan interest is payable monthly, quarterly or even rolled up until sales proceeds redeem the loan.
• We'll package up the deal for you making it an easy and straight forward process for you to follow.
• We'll get a quick response to your lending requirements.

• Green Field Developments
• Brown Field Developments
• Commercial Development
• Residential Development
• Land Purchase
• Conversion Projects
• New Build
• Refurbishments
Renovations