When it comes to property development finance, or construction finance - this is an area that we work in consistently and in fact makes up the majority of our loan applications. House building is big business in the UK due to the government's policy on increasing the number of affordable homes available. There is a great need for development finance from developers up and down the UK and especially in London. House building businesses are always looking for the best development finance deals in the market. There are dozens of development finance lenders in the UK market and knowing how each of these lenders works is very important in ensuring that an developer doesn’t waste time with an application that will ultimately be unsuccessful.
Property developers and landlords place a huge emphasis on time as any lost time ends up costing them money so hiring a broker who knows the market can save them valuable time and money. Most development finance loans are based on a percentage of gross development value. Lenders will often fund 100% of the construction costs as long as the borrower has put sufficient equity into the deal. If the developer of the landlord has purchased the land and spent many months consulting architects and obtaining planning permission and paid for these services out of his or her own pocket then this will increase the level of the developers equity contribution.
Once planning has been obtained for a particular sight there will normally be an immediate increase in the value of the site due the planning permission being accepted. This value will also contribute towards a borrower equity position. Most development finance loans have a term of 12 - 24 months depending on the build time of the scheme. The fees involved are usually 1 percent in and 1 percent out. Which means you will pay 1 percent of the gross loan amount upon drawdown of the loan and 1% of the outstanding loan amount upon pay back of the loan and completion of the scheme. Many schemes will require a development exit bridging loan to refinance any development finance and mezzanine finance secured on a completed scheme.
This is needed if the developers haven’t sold all of the units and need more time. Silver Oak Capital has completed many development exit facilities for landlords and property developers. Another type of loan often needed by developers is a stabilization loan - which is needed following the completion of a commercial building with multiple units available to let. The owners will need time to get the asset up to a high occupancy rate with almost all of the units let and producing a regular income. Therefore arranging a slightly cheaper stabilization loan to give the developers more time to find these tenants is an extremely useful tool and will contribute strongly to any borrowers peace of mind. Do not hesitate to contact one of our professional to discuss your development finance or commercial finance needs. Silver Oak Capital are the experts in London development finance and bridging finance.
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