Development Finance through LA Bridging
Development finance explained
Development finance is designed to allow developers or business owners to build new commercial properties. These properties can be let, sold or used as a base for the developers own business.
Development finance is a funding option that is short-term, normally between 6-24 months. Designed specifically to assist with the build and purchase costs associated with any residential or commercial development project. This usually means new builds, conversions or refurbishments covering single units through to multiple units built across numerous stages.
LA Bridging offer several specialist development finance options that can all be tailored to most development project.
Development finance usually comes in two parts
The site purchase
The first stage of funding is usually used to assist with the purchase of the development site. It might be land where an allocated number of new properties ware to be built or an potential property targeted as a refurbishment project.
Building costs funding
The second stage is used to pay the costs of the build works associated with the project. This is usually drawn in increments, as opposed to a lump sum payment at the start of the build or refurbishment. This can happen once a month as works are completed on the project, allowing the project to move smoothly.
Benefits of using LA Bridging
By using LA Bridging to apply for development finance you gain their experience of the commercial lending market and knowledge of which lender will be the most suitable or appropriate to meet the needs of your project build or refurbishment. Commercial lending can be complex and often subject to the type of business or circumstance and dependent on several factors that are lender criteria specific. LA Bridging can select lenders most suited to your project with a full disclosure of the current options open to your business and help guide business owners through out the application process to save time. LA Bridging will also be able to advise applicants of lending options and ensure time is not lost during the application process and that all information is collated correctly prior to being submitted. Applicants will also enjoy updates on the application which is important when working to a deadline to complete a build or refurbishment project.
The amount of funding made available will be determined and governed by a professional valuation report that will present 3 key figures of consideration:
- The Current value: The value of the site with planning or the value of the property before refurbishment.
- The total build costs
- Gross Development Value (GDV) – i.e. the value of property completion assuming all works have concluded.
Each lender will have lending parameters that determine the maximum amount that can be borrowed. LA Bridging has access to an array of lenders that could offer a significant percentage of the current value and 100% of the build costs.
Each applicant whether private or commercial, is assessed on an individual basis. The funding will be structured to make sure there are enough funds in place to complete the build in its entirety.
The lender will charge fees and interest for the loan with the amount charges based on:
- Loan amount
- Percentage borrowed against the overall costs – i.e. the combined current value and build costs in total.
- Length of time required for the loan.
Most development loans can last as long as 24 months, but this will be dependent on the nature of the project being funded.
A standard refurbishment loan may only be required for 6 months, whereas a multi-unit new build may require longer; usually 24 months. The term of the loan allows time for the property to be purchased, developed and then sold or could be refinanced with the right exit strategy to repay the debt.
Once work has commenced, the loan building costs is drawn down in stages (usually monthly). How much is drawn down is dependent on the value of work completed on-site for that month. The benefit of drawing down varying monthly amounts is the interest payable is only applicable to the total amount drawn at that point in time.
An Independent Monitoring Surveyor will act as the ‘eyes and ears’ of the project for the Lender to make sure construction is progressing on schedule and on budget, flagging any potential issues. Acting on behalf of the Lender, their costs will be payable by the borrower.
There are options available as to how borrowers can repay their Development Finance loans:
- By repaying the full amount using sale proceeds from the finished property.
- Refinance on to a long-term loan, or mortgage if the borrower wants to keep the finished development or to rent out.
- Refinance using a Development Exit Bridging Loan to solidify profit at a lower rate and potentially look to fund another future project without having to complete the sale of the current project build or refurbishment. You can find out more about Development Exit Bridging Loans at LA Bridging.
Alternative options available
Commercial mortgage lenders will only lend against ready to use property. They will not lend against property which needs to be refurbished unless the business is going to pay for the refurbishment themselves and the refurbishment itself is mostly cosmetic.
Bridging finance is generally the type of lending used where a borrower intends to refurbish a commercial property and requires funding towards that we well as the purchase. If bridging finance is required, the business will need a deposit of approximately 35% and LA Bridging can also secure lending towards refurbishment which can be as much as 100%.
If bridging finance is required, LA Bridging is able to organise a long term commercial mortgage once any refurbishment is near completion.
Where a business is looking to purchase or refinance a large portfolio of buy to let residential property, they are often told they need a commercial mortgage but what they actually need is a multi-unit buy to let mortgage which LA Bridging has access to from its lender panel.
- Risk Management
- Accumulation
- Taxation
- Business Planning
- Raising Start-up Capital
- Estate Planning
- Portfolio Management
Commercial bridging for business, investment or development
Criteria overview
- Competitive and flexible rates
- Up to 100% LTV with additional security.
- Terms from 3 to 18 months
- Adverse credit considered
- Loans from £25K to £50M
- 1ST and 2ND charged lending
Contact us today for your bridging finance, buy to let mortgage, commercial mortgage, bridging loan for house purchase, HMO purchase, emergency cashflow loans, auction finance, bridging loans for property development, bridging loan mortgage, business bridging loan, commercial development financing.
Advantages and flexibility of Bridging Loans.
Although Bridging Loans are primarily used for property purchases by private individuals and for cashflow purposes by auction buyers or property developers, a Bridging Loan has a wider range of uses some of which we have listed below.
- Temporary boost to cashflow for seasonal or liquidated stock purchases.
- Paying a trade creditor, or unforeseen invoice, tax demand or other liability.
- Increase bargaining position for a transaction or limited time financial contract.
- Business takeover, merger or acquisition of another company or business.
- Purchase of new business premises, refurbishment of commercial or residential premises.
- Renovation or conversion of a property to make ready for sale or rental.
Looking to buy a commercial property or need funds for another business purpose?
Buying at auction or property for refurbishment?
A bridge can give you funds fast to complete that quick purchase.
Need a bridge until you can sell your current home, or simply release funds for another project.
No matter how much you want to borrow, we will do our best to make it happen, without the fuss or headache.
Lender’s rates change regularly, so we always scan the market to get the best rate for your specific circumstances.
