Yes, if you are looking to raise funds to complete a development project, it may be possible to secure 100% of the cost of the build through development finance.
Also known as joint venture (JV) development finance, this type of funding allows you to raise the capital that you need without having to use your own money, as the lender will cover all of the costs, including the site acquisition and any build costs. But for this, the lender will charge an interest rate for providing the funds and the profits will be split, once the project is complete and sold.
The application process for applying for 100% development finance can be complex and obviously there are lots of factors for the lenders to consider, given the additional lending risk. Therefore, 100% development finance is typically only available to seasoned property developers, who can prove that they have completed similar projects before. Experience really is key here and expert guidance when it comes to financing the development can make or break the project.
Additionally, full planning permission will need to have been approved for the lender to consider the application and a personal guarantee from the borrower may need to be provided. This is an agreement between the borrower and lender that should the project experience issues and for whatever reason not complete, the lender will be able to recover a small percentage of the debt directly from the borrower. It is extremely rare to happen but this is why having an experienced broker on your side can help when negotiating the terms of the loan and providing the documentation needed to get the finance approved.
Each lender will have their own lending criteria but most will require documentation such as a schedule of works, a schedule of costs, a copy of the full planning permission approval and evidence of your previous development work. Our team can help you collate this and answer any questions to help reduce delays.
With regards to the interest charged by the lender, this is typically rolled up into the finance so there are no monthly payments during the loan term and the interest is simply paid when the project is completed.
Given the complexities of the application and the project, development finance lenders will typically only consider 100% development loans for projects with a gross development value (GDV) in excess of £1,000,000 with enough of a profit margin to make it worthwhile.
How long it will take to get the development loan will depend on a range of factors but generally it can be obtained in roughly 12 weeks from enquiry to completion. Ways to reduce delays include appointing an experienced solicitor that understands development ownership structures as well as using an experienced development finance broker that can select a suitable lender, support the application throughout the process and ensure that delays are kept to a minimum.
Understandably a more difficult type of finance to secure, however with the right advice and application support 100% development finance can be obtained with competitive rates and flexible terms to suit the project.
Having supported a wide range of UK development projects over the last decade, the TLP team has a wealth of experience when it comes to dealing with joint venture development finance and can help you navigate the complex lending criteria to get the 100% finance for your project.
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