Are you looking for short-term financial solutions to fund your projects? Development finance may be the answer for you! If you wish to acquaint yourself with the terms and resources within the industry, read on!
What is Development Finance?
Understanding development finance can be a daunting task with numerous financing tools propping up in the market every passing second. Development finance is a short-term finance solution used to fund property development and construction projects.
Once you have acquired the permission for refurbishment, extension, upgrade of an existing building, or planning for new development, development finance can make funds available for you at a short notice.
Development finance tools can help you cover the material and labour costs for residential and commercial property development. Development finance tools can be accessed by first-time or experienced property developers alike.
Development finance aims to encourage and support the expansion or redevelopment of commercial and residential properties through public and private investment. It is a community endeavour that enables developers to contribute to a project or deal, reaping long-term benefits for the community.
Development finance enables local business owners and developers to mitigate challenges local businesses, real estate developers, and other community members face. It is used to fund the development of communities and individuals on a global scale. The main goal of development finance is to provide access to people or communities with limited access.
Some typical applications of development finance include:
- Building and expanding businesses
- Setting up new industries
- Improving agricultural processes
- Communications networks
- Transportation systems
Development Finance Types
Development finance can be categorised into five types, namely:
1. Commercial Property Finance
Commercial property finance aims at facilitating the growth and development of commercial real estate projects. Developers use commercial property financing to cover commercial property development’s material, process, and labour costs. This type of financing is also used to purchase commercial land ideal for construction projects.
You can use commercial property financing to lease your spaces to business tenants and cover maintenance, repair, and redevelopment costs on expansion and refurbishment projects. It enables developers to fund new projects without halting their current projects until they acquire the funds from business tenants or finalise the sale on an existing property.
Commercial property finance is a great way to expand into new markets by opening your store in a new location or renovating an old one. It is commonly used with debt and equity financing to collect the cash required to fund these projects.
2. Construction Loans
Construction loans aim to finance real estate development and construction projects. Developers can receive requisite funds for residential and commercial properties’ proposed or existing construction projects.
It can be challenging to secure hard cash against an empty plot with the proposed design and construction plans. UK Property Finance has been helping independent developers secure flexible hassle-free financing using development finance as an alternative approach.
Construction finance, also known as Self Build Finance, is a short-term loan used to finance residential and commercial building projects. The funds acquired are based on the cash required to build the project and not on the property’s value at the end of the project.
3. Development Exit Finance
Development exit finance, also known as development exit funding, can help real estate developers and investors refinance their existing development loans. This type of financing is ideal if you have finished your development project but need time to sell the property.
Instead of selling the property under pressure as you approach the end of the term with your current lender, you can secure a business development exit loan giving you more time to find the right buyers for your property.
4. Property Refurbishment Finance
Property refurbishment finance is designed to assist landlords and property investors with their existing residential property refurbishments. Property refurbishment finance is a form of bridging loan that is used for various circumstances.
5. Residential Property Finance
UK Property Finance can help you find the perfect residential property finance deal irrespective of the size of your construction project, whether you are building your first property or a large-scale housing scheme.
How Does It Work?
Development finance is carried out in two prime stages. The first stage involves the purchase of land or acquiring an existing property for development. Many lenders allow borrowing up to 75% of the current market rate.
The second stage of the loan entails payment of building costs, usually funded in stages as the project meets milestones. A surveyor signs off your progress, allowing financing for the next step of funds to be released by the lender. It is observed that some lenders allow 100% borrowing of building and labour costs.
Conclusion
Development finance is a dynamic short-term financing solution designed to help real estate developers with construction projects. Choosing a qualified development finance agency is crucial to ensure streamlined funding.
Now that you know what development finance entails, the next step is to find an agency that offers the best rates for development finance, delivering affordable and quick funds.
UK Property Finance is a leading provider of all things finance. Their services range from bridging loans to all types of development finance funding and more. Contact us today to unlock thousands of development finance resources.
