Development Loans

On property development a typical offer from a High Street Bank might be 70% on the cost of the land and 70% on the building work or where the land is already purchased upto 100% of the building cost.Again we do have other options where we can improve on this.

FOR EXAMPLE ON RESIDENTIAL DEVELOPMENT WE HAVE A SCHEME WHERE WE CAN PROVIDE 100% FUNDING.

This is of particular help where a Developer lacks the mezzanine funding ( ie the difference between the total cost and what the prime Lender is prepared to lend ).This is great for new entrants into Property Development where funds are low or where an existing developer has all the working capital tied up on other developments,a new opportunity comes up and in the normal course of events the opportunity may be lost.The way it works is as follows --

Normally, as explained above, the mezzanine funding required comes to approx 30% and this scheme goes upto this amount.When 100% is required the Developer shares 50% of the profit.If the Developer is able to provide some of the funding then they receive a greater share of the profit.
Eg -- Prime Lender = 70%,Developer = 10%,Mezzanine = 20%,the Developer's share would be 65% of the profit.The minimum amount advanced are developments with a sales value of £500,000 and maximum £3 million.
Profit is calculated on the projected figures submitted by the Developer to the Funder (and the Prime Lender).This profit is then expressed as a Sterling amount and not a percentage in the loan documentation.Any increase in the profit figures (over and above the profit figure stipulated above) accrues 100% to the Developer.If there is a cost overrun the Developer will be required to provide a personal guarantee to cover any cost overruns over and above the Developers warranted costs.Essentially the Developer knows how much the Funder yields from the transaction,the mezzanine loan does not attract interest and it is to the Developer's advantage if he improoves upon the agreed cost.Conversely if there is a cost overrun then the Developer has to make up the agreed figure.We would contend this is a very fair deal !

WHAT INITIAL COSTS ARE INVOLVED TO ESTABLISH THIS LOAN ?
The costs are in line with generally accepted levels.
Arrangement fee -- 1%. Legal Fee - 0.5% approx. Valuation Fee --0.1 % approx.
Draw down fees - £500 monthly.
Commission 0.3% (payable by the funder)
Only 0.8% will be repayable up front.The balance can be included in he loan application and paid from the first draw-down
Loan Lease Finance fee £250 + VAT once accepted by the Funder.

Please visit Application Forms and complete STANDARD APPLICATION FORM No 1.

Alternatively contact us by phone,fax or email. Please see our contact page

Back | Application Form