Development Finance Without Profit Share
When looking to take out property development finance without the need for profit share, you will need to bring some money to the deal. This can be done in 2 ways, firstly, by putting money into the deal. Secondly, putting money toward the purchase of the site, or putting up a site that you already own.
This will then be subject to usual loan to value (LTV), loan to gross development value (LTGDV) and loan to cost (LTC). Loan to cost relates specifically to the build costs, not including site acquisition and the costs associated with acquisition.
We can usually arrange up to 65% of the cost of acquisition and 75% LTGDV with 100% LTC available from several lenders.
How 100% Development Finance Works
When taking out JV development finance, the issue of ownership is usually one that confuses people.
Usually, the property will be placed in a special purpose vehicle (SPV). This is a Ltd company set up purely to own the asset and hold the liability. The SPV will usually be owned by the funder, with a guarantee in your favour.
100% development finance is usually only available to experienced property developers. Applications for first-time developers can be considered but would have to be very strong to be accepted as an exception.
Outline planning permission is required for an application to be considered by a joint-venture development finance lender. For any JV application, the lender will be unwilling to take any planning risk.
The lender will be keen to see a strong return on their investment. As such, lenders will not usually consider a joint venture for a site with a GDV below £2,000,000. As a percentage, the lender would want to see a margin of at least 25% on the scheme.
Any lender willing to offer 100% development finance will only lend when the debt is supported by a personal guarantee (PG). Different lenders will take a different view on the level of PG, but most will accept a capped PG.
The Benefits Of Joint Venture Development Finance
Using a JV development finance lender instead of using your own funds allows you to develop quickly without having to tie up your own funds. By taking this route, although profits are shared, more projects can be taken on, meaning your potential profit can actually grow.
Where projects are located nearby, cost savings can be made by sharing resources between your sites.
By taking on an SPV with the lender, you would also save significantly on legal fees, with only one set of legal fees being payable.
Applying For 100% Property Development Finance
- Discuss your application with one of our experienced development finance experts.
- We will provide you with then a written agreement in principle detailing the interest rate, fees and profit share terms, along with what documents are required to submit a full application
- Once all documents are returned to us, we will submit the application alongside a comprehensive report on the project.
- Once the lender has assessed the project so far they will want to meet you and visit the site. This helps to understand the project and build a relationship between you and your dedicated lending manager. We will run through the details and fully prepare you for the meeting.
- After the site visit has been completed, your lending manager will usually take your application to the credit committee. These are the underwriters who sign off the application as acceptable to the lender. Once approved, the lender will issue the formal offer, subject to valuation and legal work.
- A Legal paperwork is undertaken and the pre-commencement meeting takes place with the lender. Full valuations and technical sense checking completed.
- Once completed, all legal paperwork is executed and the agreement is legally live.
- Work on-site can begin with regular monthly meetings scheduled to check build progress and ensure any issues are spotted quickly.
Call Us Today Or Enquire Online
Our team have a huge amount of development finance experience and relationships with all the top lenders. By working with us, you can access the whole market through one simple, quick enquiry.
We manage the whole process for you, meaning you can focus solely on the upcoming build while we negotiate with multiple lenders on your behalf to secure the best terms.
Enquire online now or call us on 01922 620008 to get a free personalised 100% development finance quote.