How to Secure Development Finance as a First Time Developer

If you’re a first-time developer looking for development finance, you may find that some lenders are reluctant to lend you the funds due to your lack of experience which can be considered higher risk.

Although everyone has got to start somewhere, right? Seasoned property developers were once in your shoes, so how did they do it?

Well, it all starts with preparation. Preparation is key – if you fail to prepare, you better prepare to fail. You need to put your best foot forward and prepare a bulletproof application.

Experience is just one factor that lenders will look for when reviewing your application. They will also consider:

·       The duration of the loan

·       The loan to gross development value

·       The security offered

·       The location of your development

·       The feasibility of the project

·       The exit strategy

If you can satisfy all other lending requirements, you’ll be in a good position and you’ll reassure underwriters that you’re a safe bet.

How First-Time Developers Can Create a Strong Application for Development Finance

As part of the application process, you will need to carefully explain how the funds will be used, whilst things never quite go to plan it’s important to outline your intentions – this is a mandatory part of the process to satisfy regulatory requirements concerning anti money laundering. Be sure to include a contingency budget to cover unexpected costs.

The more information you can provide, the better. A rock-solid application will include:

·       Details of the planning permission that you have obtained

·       Details of the development location including the value and purchase price

·       Development appraisal

·       Detailed breakdown of development costs

·       Designs and drawings of the project

·       Details of who the main contractor will be, and other professionals involved in the project

·       Your exit strategy

This is not an exhaustive list of requirements.

Unexpected Obstacles in Securing Development Finance

As a first-time developer, not only do you need to understand what lenders are looking for and how to prepare a watertight application, you’ll also need to expect the unexpected.

Not everything is plain sailing and there is an endless list of potential obstacles and challenges that you might face when trying to secure development finance for your first project.

For example, when you obtain planning permission it is usually granted for three years and so you must begin development works within the 3-year period otherwise the planning permission will be void and you must re-apply.

Another factor which could affect your development finance application is if someone else aside from the applicant has a legal in the property or land and is named on the title deeds. If you are not the sole person with an interest in the property this could delay your application and so it’s best to get your ducks in a row before you apply and ensure you have the necessary documentation to hand.

And these are only the challenges you must navigate prior to starting the development! There’s a lot more to come once the project begins.

How a Development Finance Broker Can Help First-Time Developers

Sigma Knight is an independent and impartial finance broker. We have nurtured valuable working relationships with development finance lenders, and we understand their requirements inside out.

We help first-time developers to present their application in the best way possible and can recommend the most suitable lenders for their specific project and requirements.

What’s more, we have the knowledge and experience to identify potential issues and obstacles and help to rectify those before your application is submitted.

To learn more about Sigma Knight please give us a call, we’d love to have a chat and see how we can help!