In this article, we discuss the essential steps to ensuring that you as a property developer or builder, are able to obtain finance for property development .
Step 1 – Gaining planning permission
Obtaining regulatory planning permission is uber important in the obtaining property development finance. As a property developer, you should initially determine whether your project will need any type of planning permission by getting in contact with the local council. It can be a arduous journey, depending on how ‘heavy’ project is .Obviously you can get your lenders to arrange finance subject to planning permission, but it will all end in tears if the required permits are not granted, and could be more costly as a direct result. Get you planning permits.
Step 2 – Prove your experience
It is no secret that funders prefer to collaborate with developers with past experience, preferably successful experience. This is why they’ll often ask for your CV and the CVs of other important members of the development team. If you have the experience in delivering successful construction projects, all the better for you. If on the other hand, this is your first project , you’ll either need to experienced partners and/or show that you’ve done your homework and are able to contribute both experience and your own funds to the development.
Step 3 – Find your funding options
These type of loans are used when speed is required, typically refinanced after a short-term with another funder. This usually comes at a higher interest rate.
This type of vehicle is a bit more complicated but often useful. This provides what is known as debt capital that gives the lender the right to convert to an ownership or equity interest in the development if the loan is not repaid in time.
Non-Recourse Loan / Debt
This type of funding is secured by collateral, usually real property. Importantly, if the borrower defaults, the lender can seize the property pledged as security, where LVR is usually only 50-60% of Valuation.
This article is part of our series on property development finance.
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