Property Development Finance.
Lenders assess a property development finance against a number of key criteria including return on cost / profit, loan to gross development value and loan to cost. Some lenders look for cash to be input into a project as their stake whilst others will accept planning gain and an uplift in land value as their equity contribution.
At the current time lenders are looking for a 20% return on cost / profit, loans up to 70% of Gross Development Value and / or 85% Loan to Cost.
Other key risk areas include the developers previous track record, the build time is realistic and the exit strategy is defined i.e. sell or retain and if the latter whether a refinance will be achievable in the market place.
For borrowers new to property developing, lenders will likely want you to have an experienced contract and professional team in place look to support you in your development, so having contracts in place with proven contractors will help support your application.
Residential property development funding is more readily available in the market place with a number of funders operating in the market place.
Commercial property development is a more specialist area with a limited number of funders offering these facilities which often require either a pre-let in place to the future tenant or a pre-sale to the proposed occupier at completion of the development.