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We help you to create a financial picture that fits your funding goals.
In an increasingly difficult lending market, our team uses its vast experience and personal contacts at the highest level to ensure you achieve the best financing or refinancing solutions.
Sal Privé work with a broad range of lenders ranging from high street banks to niche family offices, boutique banks and property funds, providing funding options for all your real estate finance needs.
Funding for the first phase of a visionary 1,500 homes garden village
When a listed global real estate company needed funding for their first project in the UK they had a broker working for nearly a year to arrange funding, to no avail.
Within 4 weeks Sal Privé arranged terms for a peak debt facility allowing this amazing project to proceed after 10 years of planning.
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The way your opportunity is presented makes a world of difference to the way your application for development finance is received.
Not only do we work with you to package your information to ensure it is presented in the right way, one of our experts will support you from start to finish making certain you get the best terms possible.
Find out some useful information about development finance below.
The basics of property development finance
Development finance may be required in the process of completing many different types of projects. This can range from new build residential areas, buildings for mixed use, commercial developments, and even the refurbishment and redevelopment of property and land. Depending on the project and circumstances, it can be arranged at the project outset or midway through the development. Payment is generally made in gradual increments throughout the project timeline.
As with many different types of finance, the lenders will generally prioritise the present assets you can offer as security along with the overall feasibility of the project when assessing your application. Additional information required will often be a project timetable for the project, a breakdown of the end costs, and details of any allowances you’re making for unexpected or incidental expenses.
When you can show the project is worth investing in through pure projected profit margins and economic viability, you will also need to show that you have attended to everything relating to the necessary planning permissions, licences, and allowances required. If you don’t have the experience required, they will take into account the credentials, experience, and track records of the project management, contractors, and development teams you are working with. If possible you should employ these people under fixed-term contracts, to allow a degree of increased stability in the financial calculations for both you and the lender.
As such, you need to find a development finance broker with experience and a broad panel of lenders and investors to whom they can present your project. This will give you the best possible chance of achieving the development loans you’re looking for.
Development loan terms
Usually, you can borrow up to 50 or 60% of the purchase price when it comes to buying the site. Make sure it has the relevant planning in place, or at least agreed to in principle before applying.
Development loan terms – cont’d
As for building costs, you can borrow up to 100% of them as long as they are within 60 to 70% of the Gross Development Value (GDV) although 85% of costs is more common, this will vary from lender to lender to make sure that you’re familiar with the terms before applying. The terms are usually between 12 and 36 months, with the exit agreed to be the point of sale or refinance. The loan rates can vary considerably, depending on the project, the experience of the team, and the broker/lenders involved.
What are the advantages?
A key benefit of development finance is that it can allow a borrower access to a larger sum of money. At the time of writing it’s the most extensive facility available to UK market borrowers.
The timing of the loan can also be beneficial, as the money will be released in increments through the timetable of the project. This allows for more efficient scaling of costs. The money borrowed can be up to 100% of total construction costs, and there are no upper limits on the amount that can be borrowed – subject to the terms of the individual brokers and lenders.
What about development exit finance?
Exit finance is a popular choice of developers looking to pay off development finance debts before selling the development when it’s completed. There are many benefits to consider for this, including the chance to increase profits and cut costs – exit finance can be a cheaper prospect overall. This is due to being a very specific kind of bridging loan, which means it will be offered with a low interest rate and short repayment terms.
It can also help bridge the gap between the project’s completion and sale, which can be financially difficult when loan terms come to an end before a final sale is agreed. Freeing up the capital earlier will also allow developers to start work on their next projects before the sale of the last one.
Getting 100% development finance
With sufficient security, a 100% development finance agreement can be reached. Without that security there needs to be enough projected profit margin at the completion of the project – the UK industry standard is 60% of the land value and 100% of the total build spend.
Mezzanine finance can also be arranged, depending on your circumstances.