What is commercial development finance?
Commercial property development finance is designed to allow developers or business owners to build new commercial properties. When looking to fund the build of a commercial property, finding the right lender can prove more difficult with most lenders favouring residential developments.
We work with lenders across the market who are keen to fund commercial and mixed-use schemes across the UK. We do the hard work for you, scouring the market to find the lowest possible rates. In most instances, we do not charge broker fees.
As independent brokers, we aren’t tied to any one lender, meaning we are free to find the best terms for you. Our team of experienced advisers take the time to fully understand your project before talking to lenders and negotiating terms on your behalf.
Read on below to find out more or fill in the form to talk to an expert.
Ask An Expert
Fill in the form below to talk through your requirements with an expert.
- No upfront fees
- Expert broker service
- Market leading rates
- Terms in 1 hour
Or call us now on 01922 620008
The Latest Commercial Development Finance Offers
View some of the latest commercial development finance offers from major lenders.
How to apply for your commercial development loan
Follow these steps to ensure a successful application:
| 1 | The first step before starting your application is calculating your costs, end value, profit margin and how long the project will take. |
| 2 | Enquire online or call us on 01922 620008. We will talk through your potential application, taking down any relevant details. |
| 3 | We will provide you with a full written agreement in principle. It will detail the interest rate, fees and headline borrowing terms, along with what documents are required to submit a full application. |
| 4 | Once you have completed and returned the required documents, we will submit your application to the lender along with a comprehensive report on the project. |
| 5 | Once the lender has assessed the application, they will arrange to meet you on site. This gives them a chance to meet with you and to understand the project more fully. |
| 6 | After the site visit has been completed, your lending manager will usually take your application to the lenders 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. |
| 7 | A surveyor completes a report covering the current value, anticipated build costs, anticipated gross development value and expected demand. |
| 8 | Your solicitor is instructed to carry out the legal work and satisfy all conditions. Once satisfied, you will sign the formal offer and return it to the lender. It is important that your solicitor is experienced in dealing with development finance as inexperience here can slow the process down significantly. |
| 9 | The process is now ready to complete and the funds can be released. You are now able to start drawing on your loan and begin the development works. |
How much can I borrow?
The maximum loan on property development finance is worked out using several figures.
- Firstly, the initial funding will be worked out on the loan to value (LTV) of the site. Some lenders will ignore this figure, should the following figures be acceptable.
- The lender will then consider the total borrowing in relation to the end value of the build, this is known as the loan to gross development value (LTGDV).
- Finally, the lender will agree to fund a certain amount of the build costs, this is known as loan to cost (LTC).
When looking at commercial development finance, we can usually fund 55/65% of the initial acquisition costs and up to 60/65% LTGDV. Some lenders will restrict loan to cost. However, there are lenders who are willing to offer up to 100% LTC.
Roll up your monthly repayments
When taking out commercial property development finance, you can roll your monthly interest payments into the loan. This means there are no monthly repayments to make during the loan, subject to fitting the LTGDV criteria for the lender.
Each lender has their own way of handling the interest. Some will add the interest above the maximum LTGDV, whereas others deduct it.
First-time developers
We are able to offer finance to both experienced and first-time developers. If you’re looking to develop for the first time, we would highly recommend working with experienced professionals.
Whatever your situation, we will use our contacts across the market to secure the lowest commercial property development finance rates for you.
What we fund against
Commercial development loans can be secured for the following:-
- Construction of industrial buildings
- Land with planning for commercial property
- Construction of office blocks
- Mixed residential and commercial schemes
- Refurbishment or conversion of shops
- Office to residential conversions
- Refurbishment Finance
- Pub to residential conversion
- Builds on farmland
The above list is not exhaustive, if your enquiry relates to a different scenario, get in touch and we will let you know exactly what we can offer.
How can I give my application the best chance of success?
The key to giving your application the best chance of success is by reducing the risk posed to the lender.
As with all types of development finance, reducing the construction risk by ensuring that full details are given around your background and the strength of the team is a big factor.
Where a highly experienced team in this type of development are working with you, detail around them will be really helpful.
As commercial property tends to be less liquid than residential property, the exit is key. Where pre-sales or pre-lets are possible, they will make your application much easier to manage. By reducing the risk in this area, it will mean that the lender has less concern about your ability to repay them.
When looking at commercial development finance, the more comfort you can give the lender around sale or refinance to a commercial investment mortgage at the end of the build, the better.
Working with ABC Finance Ltd
At ABC Finance Ltd. we work with commercial development finance lenders across the market. Our experience with commercial developments means we can secure the best terms for our clients quickly. By working with us, you can access the whole market through one enquiry.
From the first conversation, right through to completion, we manage the whole process for you. This means you can relax 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 fast personalised quote.
About The Author
This content was produced by our Commercial Lending Director, Gary Hemming. Gary has over 15 years’ experience in financial services and specialises in bridging loans, commercial mortgages, development finance and business loans. He is widely respected in his field and regularly provides expert commentary for specialist trade publications, specialist business press as well as local and national press.
Gary Hemming CeMAP CeFA CeRGI CSP -
Commercial Lending Director
Want to Know More…?
Use the panels below to read more on Development Finance.
