Does The Development Project’s Size Matter When Seeking Finance?

We receive many enquiries about development finance from property developers who are looking to raise monies to help carry out their projects. We could receive a request in respect of building a single four bedroomed detached property on an in-fill site in a small village to constructing fifty homes of varying styles and sizes on an edge-of-town site.

The size of a building scheme should not make a large difference in the way it is considered by the lender when you apply for development finance.
If you are seeking development finance, the size of the building project should not make too much of a difference in how the lender assesses it.

When it comes to the lender assessing such schemes, the size of the project should not make a big difference as the same principals apply from a lender’s perspective. The lender will require an adequate security margin and wish to be confident that the property (or properties) can be sold within a reasonable timescale to liquidate the liability. They will also wish to be confident that any interest repayments can be met when they fall due unless it has been agreed to add these to the amount of the borrowing and repay the capital plus interest in one go.

The same sort of supporting documents will be required by the lender in order to assess the proposition that may include site plans, estimated sale prices produced by an estate agent, planning consents/ requirements, types of properties to be built and financials such as cash flow forecast, historic audited accounts, recent management accounts and profit projections as well as development costs of the site.

Yes, the lender will need to be confident that a property developer that has previously only been involved in the construction of “one property” schemes but is now looking to build twenty-five homes on a site is capable of doing the later. Also, it is quite possible that a company seeking £5 million to build a large number of houses is going to obtain the finance at a lower rate of interest than someone seeking borrowing of £200,000 towards the building of one property.

Why not get in touch with us to discuss your requirements in detail.

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