Development Finance – When is it needed

Development Finance – A Powerful Financing Tool for Developers

It is very common for developers and experienced landlords to shuffle between various modes of financing. These decisions usually hinge upon some important parameters such as the loan term and the potential of the project.

However, many developers – especially inexperienced ones – tend to avoid taking development loans. The most common reason behind this is the lack of understanding of how such loans work. If you are undertaking a new development project, it’s imperative that you assess all the available funding options – and Development Finance ranks right at the top among these.

Common Ways to Finance a Development Project

Before we get started, let’s overview ways in which developers fund development projects.

Development Finance

This is the most common and arguably the most convenient way of funding development project. Development Finance is an umbrella term that covers all the related financing products. As is the case with many commercial loans, Development Finance is usually offered by specialist lenders who are familiar with the ups and downs of commercial development projects. Available over convenient, flexible terms, Development Finance also carries competitive interest rates, project-specific features and additional expertise from the lender.

Property Mortgage

While not practised extensively, many developers explore the regular property mortgage option to fund their development projects. Such mortgages often don’t make much of financial sense in this context. However, if you are a landlord looking to undertake a build-to-let project, this option may be worth considering. Property mortgages usually come with long terms (25+ years) and relatively lower interest rates.

Personal Funding

Novice developers also use personal funding to see minor projects through to the completion. Personal funding can take many forms – savings, pension funds, bonds, personal loans, to name a few.

Bank Overdrafts

Some banks and credit societies grant minor overdrafts to trusted borrowers for development projects.

When Should You Choose Development Finance?

Unfortunately, there is no simple answer to this question.

Here are some of the rudimentary criteria that you can base your decisions in this regard upon:

Urgency

If you have already committed to a project and now find yourself short on funds, Development Finance can be the way forward. This is mainly because traditional sources of funding usually don’t work in such cases.

Experience

It’s easier for an experienced developer to secure development loans from lending institutions. On the other hands, inexperienced developers or first-time landlords struggle to find lenders for their projects. Development Finance, brokered by a leading whole of market broker like Commercial Finance Network, presents itself as the achievable middle ground in such cases.

Project

A lot depends upon the kind of development project you are undertaking. For example, commercial development projects are better served by short term Development Finance products. If you are confident of ‘flipping’ a project or generating adequate income from it in the short term, Development Finance is a good option for you.

Have Questions? Talk to Our Development Finance Experts Today!

Development Finance, as important and useful as it is, can still have the best of developers confused. You shouldn’t, however, have to wade your way through this confusion. Commercial Finance Network brings extensive expertise and experience in the UK financing industry to help you make the most profitable decisions.

To know more about the type of funding that will serve your dream project the best, get in touch with one of our Development Finance experts today.