Development Finance – Eligibility

Development Finance – Common Qualification Criteria

Development Finance has traditionally been one of the most important facilitators behind the expansion of the UK property market. As a standalone and speciality financing tool, Development Finance can help landlords, developers and businesses move ambitious projects forward. This, in turn, helps the UK economy on the whole. In essence, the importance of property development loans cannot be overstated.

However, getting a suitable property development loan isn’t always an easy prospect. Many developers and businesses routinely see their Development Finance applications turned down by lenders for various reasons. Hence, it becomes important to learn more about the eligibility criteria for Development Finance beforehand.

There exist no rigid norms in this regard. Hence, it’s more prudent to view these as factors that directly impact Development Finance applications. Please note that all Development Finance applications are eventually subject to the lender’s discretion.

Type of the Property

A lot depends upon the type of the property that you intend to develop. Before you apply for Development Finance, it’s advisable to ensure that the property in question carries adequate potential to generate the income.

For example, Grade I listed properties find it difficult to secure Development Finance due to numerous usage limitations. Similarly, brownfield sites attract fewer Development Finance offers than all-clear greenfield sites.

Experience and Trading History

This is another important qualification criterion that almost every lender will look at. If you are an experienced developer with a substantial trading history, you can, in all likelihood, secure a property development loan of high LTV. Similarly, having a verifiable portfolio of past projects and a team of dedicated professionals at your disposal are beneficial. If you are a first-time landlord or an inexperienced developer, it is still, indeed, possible to get Development Finance, provided that you can furnish additional security. This leads us to the next important criterion.

Security

Like any other property loan product, Development Finance is subject to the security you can put up against lender’s money. To reflect this, most lenders cap the loan amount to a percentage of the GDV. This automatically brings the LTC percentage down, thereby requiring you to put up additional capital on your own. In addition to this stake in the project, lenders, at times, require a personal guarantee or a corporate guarantee towards repayment. If collateral is attached to the development loan, the collateral warrantee also needs to be presented. If you can meet these essential criteria, your Development Finance application stands more likely to meet with multiple loan offers.

Many lenders also prefer to have their funds pushed to the front of legal charges. So, it’s advisable to have an attorney-backed First Legal Charge clearance in order to maximise your chances of getting Development Finance.

Planning Permission

Many property development projects hit a roadblock due to limited understanding of requisite planning permission. To avoid having to deal with this, lenders prefer to entertain Development Finance applications that carry detailed planning along with necessary planning permission. Therefore, it’s important to have the same in place before applying for a property development loan. Please visit this page to learn more about planning permissions in regard with Development Finance.

Valuation (Appraisal)

Projects that carry convincing valuation are preferred by specialist lenders. Such lenders often carry out valuation of the project on their own or in consultation with independent, third-party valuators.

Other Details Pertaining to the Project

In addition to the relevant planning permission and conditions, lenders also need to know all the other necessary details about the project. These typically include:

• Project timelines and build stages
• List of contractors you are planning on hiring
• Tentative assessment of potential development costs
• Exit strategy (repayment strategy)

History of Credit

Whether you are applying for Development Finance as a business or in your personal capacity, it’s important to ensure that the borrowing entity possesses clean history of credit. Failing on this criterion may see the loan offer drastically reduce in amount. Additionally, lenders may also want to go through the recent financial accounts of your business.

Securing Development Finance Needn’t Be A Task

If you feel that you and your project meet most of the requirements detailed above, you can approach lenders for Development Finance. Sending countless applications to numerous lenders and banks, however, isn’t a good strategy. Many developers find themselves dealing with multiple rejections, further dimming the prospects of getting their project off the ground.

To avoid this, services of a vastly experienced whole of market broker like Commercial Finance Network are invaluable. Our team of industry veterans closely assesses your requirements and helps you find property development loan offers that best meet them.

To know whether your project qualifies for Development Finance, contact us today. We will have one of our experts get back to you at the earliest.