If you are looking to apply for development finance in order to be able to fund a building project, then it is important that you prepare as much as possible before making your application.
There are a variety of things that you should be taking into consideration, so that you can carefully plan the application that you make, and in order to ensure that getting a development finance loan is the right option for you. We take you through the information that you will need to provide, as well as overall lending criteria for development finance.
Lending criteria for development finance
It is important to keep in mind that development finance lenders will usually consider application on a case-by-case basis. However, it is still important to keep the following points in mind too:
- Term of loan: this will usually be between 6 and 18 months in total. Some lenders may be more flexible with the terms of a development finance loan, but you will usually find it is a period of 12 to 18 months without any penalties for paying the loan earlier than anticipated.
- Loan to value maximum: this will usually be in the region of a maximum of 55% of GDV. The lender will consider how much you are wanting to borrow as a percentage of the gross development value of the completed project. The maximum loan value that you can receive based on GDV is usually 55% but it can be higher.
- Experience: the level of experience of the property developer will also be important.
- Security offered: the building or site offered as security must be suitable
- Location of the development: the location of the site or building will also be taken into consideration.
- Feasibility of the project: the lender must believe that the project you intend to carry out is feasible. If they have too many concerns, your application could be rejected outright.
What information is needed for a development loan application?
In terms of the information that you will need to provide to a lender when applying for a development finance loan, you will find that you will require these details:
- Details of the site or building: this includes the value, location and the price of the site or property
- Development costs
- Development appraisal
- Planning permission details: what you are intending to build and what permission you have already for the site
- Gross Development Value details: this includes providing evidence of the expected end value to the lender.
- The details of all applicants involved. If you are a limited company then the directors details will all be required too. This includes the history of previous developments carried out, how successful they were, their CVs, and project profits from previous developments.
- Who the main contractor will be
- Who will be the project manager for the development finance project
- Company structure
- Asset and liability statement for the company directors or applicants involved
What paperwork will I need to provide?
Other important items you will need to provide include:
- A detailed breakdown of all project costs
- All designs and drawings of the project
- Planning permission details and applications
- A complete schedule of works for the project
- Details of professionals involved in the project
- Details of your previous development experience
- A completed Asset, Liability, Income and Expenditure Summary (ALIE)
- A planned exit strategy for the project being carried out