As the name would suggest property development finance is for those wishing to develop commercial or residential property. This can be for either new build projects or renovation of existing properties. Loans are usually made available on an interest only basis for the term of the project and are usually made available in arrears against architect or quantity surveyors certification in stages, as the project progresses. The amount advanced depends on the projected value of the development, typically lending up to 75% of the final value. The expertise of the developer will also come into play in determining the amount available and repayment terms. As a guide you can expect to pay 1.25% - 2% above base rate for this type of facility.

Property development finance may be appropriate if you are seeking £150,000 upwards. You will need to have planning consents all ready in place before you can successfully apply for property development finance. If you are an experienced developer with several successful developments under your belt you may be able to secure funding before planning permissions are finalised.

Ideal for:
Individuals or businesses that have planning consent to build or develop residential or commercial property and are seeking funding to finance the project.

Security required:
The land or buildings connected to the development will act as security. On rare occasions the developer may be required to provide additional security.

Advantages:

• Gives you access to finance to help with the development.
• Interest only repayments allow you to minimise cost of finance.
• Full funding is agreed in advance.

Disadvantages:

• Could be more expensive than a commercial loan because of the short time frame for the banks to recoup their money.
• Lenders will only release cash against certification.

Key UK Providers

• High Street Banks
• Specialist Lenders