An Introduction to Commercial Development Finance

silhouette of construction worker on a scaffold
silhouette of construction worker on a scaffold

Whether you’re looking to take your first steps onto the commercial property ladder, or you want to kick start your next project, you will probably find that you need to source commercial funding.

There are a whole host of commercial development finance solutions available for landlords, property developers and investors. But the lending market can often be overwhelming, even for the most experienced property developers and landlords.

We’ve created a helpful introduction to commercial development finance – we hope that you find it useful.

What is development finance?

Development finance is a type of loan that releases a set amount of funds in stages, in order to cover the cost of the development of a commercial property.

The funds are generally released at set stages of the project and are typically taken out over a period of six to 18 months. So, for example, funds are released in the early stages to secure the property and then at various points throughout the project to allow for construction and refurbishment.

Once the project has been successfully completed, the property can either be sold or a commercial mortgage can be taken out against it.

Whether you’re completing a short-term refurbishment project, major renovation work or a ground up development, there are lots of development finance options available, designed to accommodate your project scope and time frame.

Commercial development checklist

If you’re considering applying for commercial development finance, almost every lender will ask for the following information before they start processing your application:

  • Details about your company
  • Your development track record, including evidence of experience and proven returns
  • Six years’ business accounts and tax returns
  • A thorough breakdown of project costs
  • Detailed development plans
  • Estimated gross development value (GDV)
  • Details of assets and liabilities associated with your company
  • Exit strategy plan

The amount you’ll be able to borrow depends on a number of different factors, including your credit history, how long you need the finance for, and your track record when it comes to managing and delivering successful property development projects.

There is also a range of other development finance options that can be used to tap into the commercial property sector, including commercial mortgages, bridging loans and auction finance.

Choosing a commercial mortgage for your exit strategy

Commercial mortgages are used to purchase a wide range of commercial properties such as offices, warehouses, shops and other commercial buildings. They are commonly taken out following a commercial development project.

Just like a residential mortgage, commercial mortgages allow property developers to purchase a building and spread the cost over a set period of time.

If you’re considering buying a commercial property, it’s important to speak to someone experienced in the sector to ensure you are aware of all the funding options available to you.

 

Get in touch to speak to one of our skilled and experienced team. Here at Stewart Hindley, we are always on hand to answer any of your queries regarding commercial mortgages and commercial development finance.

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