Careful planning and forethought hold the key to getting a good deal on any type of secured loan. Development finance is no different, particularly given how every contract issued is a bespoke agreement between the lender and the borrower.
With this in mind, here is a brief overview of seven helpful tips for choosing development finance and ensuring you get a good deal:
1. Seek broker support at an early stage
Building a detailed knowledge and understanding of the potential lenders in your market could prove a complex and time-consuming task. The alternative is to enlist the support of an experienced development finance broker, who can help you make sense of the options available in no time. Broker support is provided 100% free of charge to the client, so it simply makes sense to bring a skilled broker on board.
2. Explore the alternative options available
You may have your sights firmly set on development finance, but it is still worth considering the other options available. For example, your broker may suggest bridging finance, a commercial mortgage or a specialist secured loan as an alternative to development finance.
3. Showcase your experience
Development finance specialists always show preference to experienced developers with an established track-record. The credibility of your application will be assessed largely on the basis of your background as a property developer, along with the evidence you are able to present of completed projects to date. The more impressive the portfolio you present, the more likely you are to be offered a competitive deal.
4. Be ready to put on a presentation
You will also be expected to present all important information concerning your project in a clear and concise manner; short and long term financial projections, planning permissions and building regulations, involvement of third-party contractors, estimated completion timeframes, competition/demand in the local market and so on – all components of your application that will be scrutinised by your lender.
5. Careful contingency planning
You can also expect to be quizzed on a range of ‘what if’ scenarios along the way. Your lender will want to see that you have taken every possible contingency into account and have planned thoroughly for all potential outcomes. If things hit a snag along the way, they will want to know you can be counted on to know exactly what to do to keep the project moving.
6. Emphasise your exit strategy
More specifically, development finance specialists want to see evidence of bullet-proof exit strategies. Applicants need to convince lenders that they will definitely get their money back in full and with an agreed deadline, irrespective of what happens along the way. An exit strategy could be selling the development and using the proceeds to repay the loan, or refinancing the facility onto a longer-term commercial mortgage.
7. Don’t delay Development finance can be arranged quickly, if and when all essential paperwork is in order. But as it is impossible to rule out delays and disruptions, getting started as early as possible comes highly recommended. Broker support is particularly important when time is a factor, ensuring your application is expedited and processed as quickly as possible.