Development Finance / Senior Debt

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Development Finance / Senior Debt

Our expert team are qualified to source and negotiate your development finance, whether this is your first project or you are an industry veteran.

Features of Development Finance
  • Finance for residential, mixed use, care homes, healthcare, commercial and hotel projects
  • Coverage in England, Scotland & Wales
  • Up to 70% LTGDV (higher with mezzanine/equity)
  • Up to 100% LTC
  • Joint venture and equity available
  • Terms from 1 to 5 years
  • Adverse credit accepted
  • Rates from 0.34% p/m

As one of the largest brokers in the market, we have access to a comprehensive list of lenders and institutions globally – these lending decisions can be made on the same day in many cases which prevents developers and investors from missing out on opportunities in time-sensitive situations

Learn smarter and more efficient leveraging strategies

By minimising your own equity investment and maximising your gearing, you can use your own money more efficiently and increase your Return on Equity (ROE). By finding a product that helps you use your money more efficiently, you can reduce your risk in each development project and increase the number of projects in which you can invest. For the benefit of comparison, the following assumptions have been made:

  • Total fee costs are consistent for each of the lending options
  • The interest calculations assume that 50% of the construction facility is drawn for the whole term
Scenario 1 – No debt (100% equity investment)
  • Total project costs – £1,975,000
  • Debt facility – £NIL
  • Equity invested – £1,975,000
  • GDV – £2,570,000

The profit for the scheme will be
£2,570,000 – £1,975,000 = £595,000
ROE = £595,000 / £1,975,000 = 30%

Scenario 2 – Borrowing with a retail bank (at 65% of costs)
  • Total project costs – £1,975,000
  • Debt facility – £1,283,750
  • Equity invested – £691,250
  • GDV – £2,570,000

The profit for the scheme will be
£2,570,000 – £2,058,311 = £511,689
ROE =  £511,689 / 691,250 = 74%

 Scenario 3 – Borrowing with a challenger bank (at 80% of costs)  ·
  • Total project costs – £1,975,000
  • Debt facility – £1,580,000
  • Equity invested – £395,000
  • GDV – £2,570,000

The profit for the scheme will be
£2,570,000 – £2,115,466 = £454,534
ROE = £454,534 / £395,000 = 115%

 Scenario 4 – Borrowing with a lender (at 90% of costs)
  • Total project costs – £1,975,000
  • Debt facility – £1,777,500
  • Equity invested – £197,500
  • GDV – £2,570,000

The profit for the scheme will be
£2,570,000 – £2,160,561 = £409,438
ROE = £409,438 / £197,500 = 207%

 

SUMMARY:

Although these figures below are for illustrative purposes, they clearly show how changing your strategy can increase your return. By employing higher gearing, you can get a greater return on equity, take on more development projects and commit to a lower capital out-lay.

FAQ’s:

Q: What Interest Rate Will I Be Charged?
A: Each loan is bespoke; however, we can arrange finance from 0.34% per annum.

Q: How Soon Can I Have the Money?
A: The time between application and completion vary lender to lender but we will always take your completion timescale. Lenders are generally able to complete within 2-8 weeks.­

Q: Do I Have to Make Payments During the Term of The Loan?
A: You can opt to service the interest during the term of the facility however it is most common to roll the interest to the end of the facility. This means there are no monthly payments.

Q: Can I get finance as a First-Time Developer?
A: Yes, we have many lenders who are happy to lend to first-time developers.

Q: Can You Lend Against Sites Without Planning Permission?
A: Yes, we have lenders that will lend in this scenario.