Development Finance: Ingenious Cash Flow Solutions For Property Developers

Development finance can be a boon for property developers if appropriately executed, but it can be tricky. If you are a developer, you may find yourself in sticky situations needing funds on short notice if you need to finance multiple properties at once or buy properties during an auction.

An ideal situation would entail you celebrating with the latest property development, which results in it garnering the proper attention from selling agents. However, it is rarely the case that things work out smoothly and on time.

It is usually more complicated than in the real world; you have multiple ongoing developments with your lenders keeping tabs on your progress. Naturally, it is easy to get overwhelmed with your financial partners needing arrangement fees and deal statistics.

It can be challenging for developers and investors to move on to the subsequent development without financial assistance in the form of additional and spare capital until you finalize the sale of your current one.

Innovative leaders and financial pioneers have uncovered ingenious financial assistance solutions for those wishing to proceed to the subsequent development project without rushing to sell their existing scheme.

Development finance helps you move on with your property development business using bridging loans. These secured loans help release cash equity from your existing finished development project, enabling you to move on to the next.

What Is Development Finance?

Development finance is a fund solution that allows developers to refurbish or invest in a property when running low on funds. Development finance loans are available for all development projects enabling you to borrow a few thousand pounds up to millions.

A typical amount to borrow is around £25,000 to £100,000,000, with UK Property Finance offering 90% loan to cost & or 75% loan to GDV, which is the estimated market value of the development project.

Unlike other finance solutions, you don’t get the entire loan amount in one go unless you are borrowing a small amount of money. If your development project requires a large sum to be borrowed, your lender will release the loaned amount in stages and instalments.

It is usually offered on an interest-only basis with the primary loan amount with all the interest instalments repaid in one lump sum once the sale of your existing development project goes through.

What Are The Main Costs?

The fee and charges can vary from one lender to another when acquiring development finance. However, the following costs apply in most cases as the primary fee for development finance:

Facility Fee:
Facility Fee or arrangement fee is calculated as a percentage of the primary net or gross loaned amount.

Interest Rate:
Once you acquire development finance, interest on development loans is charged annually or monthly. The ordinary interest rates are 7% annually and 1% monthly.

Exit Fee:
As the name suggests, the exit or completion fee is calculated as a percentage of the primary loaned amount. Some lenders may charge a rate on the total value of the developed property instead of the total loan amount.

Broker Fee:
While some brokers offer their services free of charge as they get commissions from other lenders once they book customers, most brokers charge a fixed fee or percentage on the direct loan amount.

Development Finance Advantages

Let us look at some benefits of development finance that allow large and small businesses with cash flow solutions.

• Quick access to funds
  Development finance is a quick cash flow solution enabling access to funds on short notice. Development finance is usually an interest-only loan which means interest is charged on the funds released and not on the total borrowed amount. Since development finance entails funds being released in stages throughout the project, it affects your interest payments positively.
• Short-term repayment
  Development finance is usually loaned for six to 24 months eliminating the burden of being indebted to your lenders for an extended period.
• Low-interest rates
  Development finance loans are offered at low-interest rates. If you are an experienced developer, you may be able to get funds at an even lower interest rate for larger projects. Development finance is ideal for developers struggling to secure money for projects that traditional lenders may consider unviable or unsuitable. It is especially true in the case of rundown and derelict buildings.
• No limitations on the borrowed amount
  Development finance offers a unique benefit of borrowing up to 100% of the total costs if the project is deemed viable, irrespective of the total construction cost.

Development Exit Finance

It is always advisable to have an exit strategy for returning financial support. Development exit finance is an effective way to pay off your debts before time.

Developers use development exit finance to pay off their debts before finalizing sales of their development project. The advantages of development exit finance include:

• It increases profits and cuts costs as exit finance is cheaper.
• It bridges the gap between the completion of your project and its sales, allowing you more time to finalize the deal of your project.
• It enables you to free up your capital earlier than expected, allowing you to begin other projects.

Development exit finance is a type of short-term bridging loan that is usually offered with a low-interest rate.

Conclusion

Now that you are familiar with the process of acquiring development finance and its importance, the next step is locating a competent development finance provider that caters to your specific needs. Another important factor when choosing a cash flow solution provider is ensuring that you get the loaned amount quickly and at the best market rate.

UK Property Finance is a leading provider of financial services ranging from bridging loans mortgage finance to secured lending and development finance. Their interest rate is as low as 0.43% and can increase by 1.5% on your direct loan amount.

UK Property Finance is FCA authorized and regulated, making it your prime trusted financial partner. We offer a variety of customizable financial solutions ranging from bridging loans to secured loans and development finance. Whether you are a first-time borrower or a seasoned property developer, we have personalized solutions curated for your specific needs. Contact us today via call or website to unfurl the magic of financial assistance with zero upfront fees and leading market rates.