What Can You Do With Property Development Finance?
A property development finance loan is used to build or buy a residential, commercial or other type of property. Different types of properties are covered under this category. This financing option can also cover a home loan, bridging loan, term loan or personal loan.
What Purpose This Fund Can Be Used?Most borrowers use this financing option to fund complete development of a property from the start to the end. You can also use this finance for restoration, refurbishment, property conversion and ground up developments. You can use it to buy the land and build your housing structure on that place.
More information on property development finance
Why Use This Finance Option?
You get many advantages with this finance that is not available with other financing options. You can raise the whole capital at the same time for building a residential or commercial building. This way you are assured of your project getting completed. The development loan can be repaid once the project is complete, refinanced or sold. This financing option is perfect for property developers. They can preserve their own investment to handle the unexpected costs during the property development. They can take up larger projects that would not be possible with their own investments. More projects can be started and completed at the same time. They do not have to wait for a current project to complete or sell to start a new project.
Who Is Eligible for This Finance?
The eligibility criteria vary based on different factors and from one lender to another. The lender takes into account the project scope, and developer's record in building properties and paying the loans. You can expect to receive a loan that is 70-75% of the total gross development value. Those who have completed a similar project earlier stand a better chance of getting the loan. The current balance sheet should be strong showing positive assets and financial statement. The current project's feasibility study must show it as a viable project. Some areas are better suited for residential properties while others are better for commercial ones. The developer must have obtained planning permission before approaching the lender. The bank will study all these reports when assessing the application for the property development loan.
What Information the Lenders Need from the Loan Applicant?
You have to provide personal ID, proof of income, bank statement, company details, purpose of loan, property information, repaying plan, financial statements, the record showing any property development experience, details of the team members involved in the development, and some other project details. All this information is used by a lender to assess the loan applicant's eligibility for this property finance.
A lot depends on the gross development value provided by the loan applicant. It helps the lender assess the project viability and confirm if it is worthy of receiving the fund. The loan application will face hurdles if the total construction cost is more than 75% of the GDV. Developers who have previous property experience and maintained a good financial record can expect quick processing of the loan. This finance option is available for both small and large property development projects.