Finding the best development finance lenders
If you don’t have time to search the market or are concerned you’ll miss the best development finance rates and terms, I can help.
Read on for more information. Or, if you’re ready to talk, complete the form or give me a call on 01492 233 808 for a no obligation conversation about your project.
Finding the best development finance lenders
Development finance is a key component to any project, whether you are self funding or borrowing from a development finance lender.
Your development finance facility needs to be competitively priced, as easy as possible to get and be available on your time scales, when you need it.
As a broker with over 17 years experience in the development finance industry, I have an expert knowledge of the lenders and their products.
I can save you time, by putting you in touch with the right lenders quickly and I can save you money by finding you the best rates and terms.
You also want to be working with a lender who is strong, stable and experienced. I have seen enough lenders go out of business, leaving their clients in the lurch, and want to make sure you are with a lender you can rely on.
How is development finance different to bridging or other commercial finance?
There are several ways development finance and bridging finance differ to other sorts of commercial finance.
The most obvious is the term. Commercial loans are often for several years whereas development finance and bridging finance are generally repaid within much shorter time scales.
Commercial mortgages will be dependent on affordability constraints, too, which development finance and bridging aren’t.
Development finance and bridging finance will usually have the interest either added to, or deducted from, the loan so monthly payments aren’t needed.
Commercial finance will be repaid at the end of the term, which isn’t the case with bridging finance and development finance.
At the end of the loan term you will owe the full amount borrowed, plus interest and fees. Lenders will be expecting you to provide an exit plan, which would normally be sale of the asset or refinance to a long term mortgage.
Which development finance lenders should I apply to?
There are various criteria you can look at when thinking which lender you should apply to.
Understandably (but not necessarily correctly) most borrowers consider the cheapest lender to be the best development finance lender and therefore the one they should apply to.
However, I don’t believe that’s the case. Of course, you don’t want to be paying too much for development finance but you need to consider more than just rate.
When I put a client with a lender, I look at the applicant’s needs and particular project. I’ll do the same for you.
It’s important to look at how easy it will be to get the draw downs you need, how quickly you can get the loan completed as the cheapest money in the world is no good if you can’t get at it.
You should also ask and consider what their level of experience and expertise is. Any lender can put up a website with great copy but not all a lenders really have what it takes to help clients and their project.
I will always put you with lenders I believe to be strong, stable, experienced and who look to help clients, not take advantage of them.
How do I get the best development finance rates?
While above I did say rate is not the only consideration with development finance, it is very important.
It’s important to note that a lower quoted rate does not mean a cheaper loan. The way interest is calculated is crucial – is the development finance interest retained or rolled up?
Rolling up of interest is cheaper than retained due to the way it’s calculated. Rolling up means interest is added at the end of each month, based on the balance.
Retained interest is where the interest is deducted from a gross figure (this will be the development finance you want to borrow plus the interest) so you are paying interest on interest from the start.
Aside from this, the best rates are reserved for development projects lenders think will be the safest. We are talking about development loans which are at low loan to value, in good locations being worked on by experienced developers.
That’s not to say if you are looking for first time development finance you need to pay very high rates, just lower risk projects come with lower interest rates.
To put yourself in the best light when applying for development finance a thorough and well presented application is always a good start.
Lenders (and brokers) like to have applications where the important information is clear and easy to find.
It’s also a good idea to proved development finance lenders with all the information they will need, such as costings and planning information.
Being organised puts you in a good light and helps give the impression you are experienced and a safe pair of hands.
A clear exit route (method of repayment) is also important for a good rate. Lenders want to be sure they are getting their development finance back so look for solid exit plans.
Having clean credit helps, too. That said, lenders look at the development project on its own merit so don’t hesitate to get in touch if you have bad credit, I may still be able to help.
The more of your own capital or assets, you can “put in the pot” the better. Not only will it keep loan to values down it also shows lenders you are confident in and committed to the development project.
Is development experience vital in applying for development finance?
The quick answer is no.
Although experienced applicants will have more choice of development finance those applying for first time property development finance still have options.
If you don’t have experience and this is your first development project, lenders may look at reducing the loan to value they can provide and will possibly charge slightly higher rates. (though this isn’t always the case)
If you don’t have experience lenders will always want to make sure whoever is doing the work and managing the site does have a track record.
You will need to have either a main contractor do all the work for you or employ a project manager to come in and organise the various trades and monitor the progress.
Will development finance providers consider unusual circumstances?
All lenders need to lend to stay in business, so as long as a project makes a sound commercial investment they will consider it.
Unusual circumstances, such as bad credit, no track record or a complicated project, can be overcome with the right lender and enough capital going in from your end.
No matter the project, I am happy to take a look and talk to my wide range of lenders to see what can be done for you.
Can specialist development finance brokers help me apply to the best development finance provider?
Yes, using a specialist development finance broker can be a very effective way to get your project to the right lenders.
I work with “one man bands” and Plc’s, the best lender will be the one who best suits your particular project’s needs.
I have a wide panel of lenders who cover a full range of development finance products, from
small loans of under £50,000 up to tens of millions.
Using a broker, like me, can be both a time and money saver.
I cut out the need for you to trawl the market looking for the right lender, this can save many hours of internet searching and time taken on the phone and swapping emails.
Development finance lenders I talk to also know I will be in touch with other lenders so they will be more likely to offer their best terms than if you just go directly.
I can also negotiate lower fees, in some circumstances, saving you even more.
Without using a broker for you development finance, you run the real risk of paying too much for your facility.
Which are the best UK development finance lenders?
This is not an easy question to answer, as the best development finance lender for you might not be right for someone else.
It will be determined by you as an applicant and the project.
A first time developer will have different development finance options available and needs to be met by a development lender than a long standing, experienced property professional.
For example you might want the lender with the lowest interest rates. Or, for you, it might be the lender who needs a smaller deposit.
Whatever your circumstances, I can put you in touch with development finance lenders that are best suited for you.
How can I access the cheapest development finance rates?
The cheapest development finance rates are normally the most difficult to get as they are reserved for the best applications.
To have the best chance of qualifying for the lowest development finance rates the following points are important:
Experience: Having a strong track record of previous projects is a big consideration from lenders when looking at rates.
Level of investment: The amount of your own capital you are putting in will affect the development finance rate you pay.
The more you put in shows confidence in your ability and your development project, lenders can reward this with better rates.
Size of development finance loan: Smaller loans often have higher rates than larger ones. Lenders (and brokers) have to do, more or less, the same work to lend £100,000 as they do to lend £10m but the returns are better on larger amounts, hence you can expect lower rates.
Knowing who to apply to: Having a good knowledge of the market is important, too. Development finance rates can vary greatly from one lender to another. Having the right lenders on your panel can make sure you get the best rates.
Where can I find help on choosing a development finance lender?
I can help you choose the right development finance lender for your project.
Over the last 17 years, I’ve built up a panel of lenders who are able to provide development finance all over the UK.
Whether you are experienced in borrowing of if this is your first time, using a property development finance broker like me can be great benefit.
From saving time and money, I can remove the headache of looking for finance, leaving you time to focus on the other aspects of your project and business.
To see how I can help, give me a call on 01492 233 808. My email is firstname.lastname@example.org if you’d prefer to drop me a line.
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