The accuracy of the information passed on to the lender is of paramount importance. If the lender is struggling to make the sums add up, your credibility will take a serious hit. Mistakes in the numbers at such an early stage could be the difference between an accepted application, or a decline.
Make sure the information is easy to understand
Even if the numbers are all correct, if the information is not presented in an easy to understand format, you are making it more difficult for the lender to say yes. By using spreadsheets to present figures, keeping drawings clearly marked and scanned, and any written information typed and free from errors, you make life easy.
When a lender is faced with a pile of applications on their desk, you may well find yours ends up at the bottom of the pile if the information is not immediately available.
Be honest about your level of experience
If the project you’re presenting is the largest you’ve ever worked on, that’s fine. If it’s the first you’ve ever worked on, again certain lenders will still be happy to lend. If you have several projects in the background but can’t offer any details, can’t provide photos of the build or give any evidence, then suspicions are aroused.
Lenders will check everything that you say, so it’s important that you never overstate your experience. A lender would rather lend to somebody with less experience, but 100% honesty, than somebody who can’t back up what they say.
Don’t overstate potential sale prices
There are several tools used by lenders to get a good understanding of the likely sales prices for a project. Although a development finance lender may be initially impressed by the high margins on your project, if they are overstated, it will soon surface.
Initial checks will be carried out to check likely values against similar properties in the area. This could immediately flag up a problem. If you get through this check, the surveyor will pick up the problem when writing his report. Inflated values may be a point of concern for the lender, making your application less likely to succeed.
Know your costs throughout the build – not just the headlines
Your lender will want to see detailed costings for the build, broken down by month. It is far better to produce these at the start of the process, rather than cobbling them together when asked.
For the lender, the required draw down schedule is just as important as the headline numbers, so make sure this is right.
Lenders will generally want to meet with you during the application process and it is vital that you know your numbers by then. Failure to do your research by this point can end up with a meeting that ends up looking like a bad episode of Dragons Den!