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The Dos & Don’ts of Securing Property Development Finance

bespoke - August 24, 2022

Are you looking at raising finance for your property development, but aren’t sure where to start? It can be difficult navigating and keeping track of everything you need to do, and you may have already noticed that some people find it easy to get their finance request approved, while others struggle to get their projects off the ground.

Why is this, and what can you do to make the property development finance process quicker, easier and smoother? In this article, we’ll cover everything you need to know in order to get the money you need from the right people in the shortest time.

What property development finance options are available to you in the UK?

There are several options available to you when looking to fund a property project:

  • Bridging financeThis is a great option for properties that may not attract a commercial mortgage. They’re a flexible, short-term finance solution that is generally easier to access. Bridging loans are secured against land or property and offer some seriously competitive rates.
  • Commercial mortgageA commercial mortgage can be taken out against any property that isn’t going to be used as a private residence. This includes warehouses, offices and shops. 
  • Property development financeA loan that’s specifically designed to be used on the development or refurbishment of residential, commercial or mixed-use properties. It’s the best option for builders and developers in the UK hoping to fund large-scale projects.

While there are lots of options to choose from, we’re seeing a significant uptick in the popularity of property development finance, but why is that?

What is property development finance?

Property development finance is a loan used to develop a property for up to two years. The lender covers building and refurbishment costs, freeing up your capital. At the end of the agreement, the land or property is either refinanced or sold, allowing you to move on to your next project more quickly. 

There are some very important dos and don’ts that you need to keep in mind when applying for property development finance. Here’s the advice from out team of development finance experts:

The dos of property development finance

Here are some good habits that will dramatically improve your chances of getting your finance request approved. 

Do use a commercial broker

Commercial brokers are there for a reason – they’re specialists in finding you the best deal, even if that means getting your finance from a more obscure lender. 

Your everyday high street bank most likely won’t be interested in your development, but your broker truly is. It’s in your broker’s interests to find you the best deal possible in the shortest amount of time, so you can be 100% confident that the deal you’re presented with is in your best interests.

Not sure where to start? Talk to our commercial finance specialists today for tailored advice. We’re on hand to answer any questions you might have, and can deliver finance offers in under 24 hours, getting you the funding you need quickly and efficiently.

Do be honest at every stage

Have you got a somewhat murky financial past? Don’t worry, you’re not alone!

Many developers successfully fund their projects despite this. Remember, your past dealings will come out eventually, which can lead to complications down the line. We highly recommend telling your broker everything that may be an issue in the future.

This allows them to find the right finance solution to meet your unique needs (and prevents any hard feelings from them finding out later!).

Do make sure you can properly analyse your deal

When presenting your deal, you can rest assured that any lender will shake the tree pretty vigorously to see what falls out. 

You need to be confident that you’ve got the answers to all of their questions, consider:

  • Are your costs accurate/reasonable? What are the odds of unexpected bills?
  • Have your team got enough experience? Can you prove this?
  • Can you justify your profit numbers?
  • Do you have a comprehensive exit strategy?
  • Have you got a backup exit strategy (in case the market changes or your contractor becomes insolvent)?

Remember, if your deal is accepted, this is amazing news! It means that the lender truly believes that this is a good investment.

Do build up a brand

When seeking investment, it’s important to consider your development as a business. Optics are important for both commercial lenders and private investors, so you’ll need to be able to reassure anyone involved in your project.

Get yourself a website, a logo, a name and a sleek business card. This helps people understand that they’re not just doing business with you, they’re dealing with your brand.

Do ensure you have an up-to-date CV

While this seems like quite an obvious one, you’d be surprised at how many applicants don’t have a detailed and up-to-date CV. 

Make sure to include the projects you’ve worked on in the past, your relevant professional experience and why you’re a good prospect for funding.

If you don’t have much experience yet, you may also want to build a relationship with a seasoned developer who would be willing to collaborate on a project with you, helping you to gain the experience you need to go it alone. 

When getting started, you’ll need either a good track record of delivering development projects, or large amounts of available equity.

Don’t worry if you’ve no specific project experience, just make sure to include everything that’s relevant to what you want to achieve, and we’ll do the rest. 

The don’ts of property development finance

We’ve done the dos, so now onto what you should avoid at all costs.

Don’t misrepresent your financial appraisal

You’d be surprised at how many developers come to us with appraisals that leave out costs and deliver unrealistic projections because they’re desperate to get the funding that they need.

This is a fast-track to disappointment and we highly recommend being as honest as possible.

Generally speaking, when we see this happen, the project is unlikely to succeed in the first place, so we recommend pursuing something else instead. 

Don’t forget to have a shareholders’ agreement

A shareholders’ agreement protects you from any issues that may arise with partners.

It should outline:

  • Everyone’s rights and obligations
  • How shares will be sold and distributed
  • How the company will be run
  • What protections are in place (especially for minority shareholders)
  • How important decisions will be made

Don’t treat your team like your friends

While you likely will get on well with your team, it’s essential that you keep things professional at all times.

Everyone is involved in your project for commercial reasons. Disagreements can be costly, so try to avoid any situations that might cause friction.

Get your project funded in less than 24 hours.

There are a lot of moving parts in any property development, we get that. That’s why our team at Bespoke Commercial Finance work tirelessly to find the perfect finance solutions for our clients in under 24 hours. 

While traditional banks and brokers are focused on closing the deal, we’re committed to finding the right deal for you at the best available rate. Rely on our wide, established network of lenders and maximise your investment.

We’re on hand to answer any questions you have. Give our property development finance team a shout today to take the first step towards a successful development project.

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