Development Finance, Information
Written by Jamie Gillispie
Property development finance is a type of funding specifically designed to help with the costs associated with building and development projects. Development finance is provided for short terms to cover the cost of development and is therefore a crucial element for anyone looking to undertake a property development project.
But a question that frequently arises is whether one can obtain 100% development finance—meaning the entirety of project costs are covered without any initial capital requirement from the developer. Let’s delve into this possibility, understanding its feasibility, the factors influencing it, and much more.
Experience and Expertise: A developer’s history of successful projects showcases their capability to manage and complete developments efficiently, which is crucial for gaining lender confidence.
Financial Stability: Demonstrating a strong financial background is vital, as it reflects the developer’s ability to handle budget fluctuations and ensures financial reliability which lenders prioritise.
Reputation and Relationships: A well-established reputation and strong relationships with contractors and local authorities smoothens project execution and indicates reliability, further persuading lenders.
Risk Mitigation: A track record of effective risk management in past projects can influence loan terms, leading to potentially more favourable conditions.
Acquiring planning permission is another key area that can significantly influence the likelihood of attaining 100% development finance. Projects that have secured planning permission are often seen as less risky by lenders. They are perceived as more likely to proceed without significant legal or regulatory hurdles, hence potentially qualifying for better financing terms
For a project to be considered for 100% development finance, it ideally needs to demonstrate a profitability margin of 25% or more. This high threshold ensures that there is sufficient financial buffer to cover unexpected costs or market fluctuations, making the project a safer investment for lenders. Developers should meticulously calculate anticipated revenues and costs to project this profitability margin accurately.
Another vital aspect to consider when exploring the feasibility of 100% development finance is the interest rate. Typically, the interest rates for such high-value loans may be higher due to the increased risk that the lenders take on by covering the full project costs. Property developers need to consider how these rates will affect their overall financial model and the project’s profitability
When contemplating 100% development finance, it’s important to understand what types of projects are more likely to secure such funding.
At Elleah Property Finance, we understand the intricacies of securing development finance. Whether it’s guiding you through the application process, helping optimize your credit standing, presenting your case, our team is here to ensure that your financing needs are met comprehensively. Contact us today to discuss.
Contact us to schedule your initial consultation and discover how Elleah Property Finance can support your next project’s success.
