Land development loans
Land development loans offer you the opportunity to create a project from the ground up, allowing you control over the timing and work schedules through several stages, from conception to construction. This way, you can respond more efficiently and assertively to market needs, resulting in a very good return on your investment.
A land development loan can help you get your project moving and give you a competitive advantage. Lenders will assess the potential value of the project once it’s concluded, thus offering you attractive rates. Another appealing factor is that as development loans can often be repaid in a shorter amount of time, overall borrowing costs can be kept low.
There are various situations unique to each developer as to why a land development loan is desired: the land could be your property, or you could be planning a profit sharing or joint venture. Either way, with or without planning permission, a land development loan could be the best answer to start your new project from the ground up.
Who would require a land development loan?
You may require a development loan if your capital is mostly tied up in another project and you don’t want to pass up an attractive investment opportunity. In this case, you can apply for a land acquisition development loan and start right away. If the property has already been issued planning permission, risks will be low. Land acquisition and development loans will help the financial planning of the works ahead, as well as mobilise means and materials.
If your plot has not been issued permission, a land acquisition development loan can help you acquire the property and proceed. You might not want to use your own capital, as it can be a fairly lengthy licensing process. So, you can apply for a development loan to ease the pressure off your financial planning. Once the S106s and CILs are negotiated, clarified and permission is issued, your property will have a significant uplift in value. Your project will also have a much higher chance of success and can be refinanced at a profit.
Ground-up construction loans
Some developers may decide to take the path of a ground-up construction loan. This short-term financing plan can be used to cover the cost of construction only, or to buy and build out an entire property or development, from multi-unit schemes to mixed-use development projects.
In order to obtain construction and development loans, besides ownership or land entitlement, your experience will be an important, if not exclusive, factor for lenders to assess the risk. A detailed CV is important and should highlight completed projects similar in size to the one that you are looking to finance. With outstanding experience and capital, you are seen as an ideal customer for a land development loan.
When there is a shortfall with the developer’s deposit submission, it can be possible to obtain Senior Debt and Mezzanine without any profit sharing. If the shortfall is still too much to progress a scheme, we can approach Private Lenders to bridge this gap. In these instances, there is normally an equal profit share on the uplift value on completion.
Planning Permission
Planning permission is also essential to get approved funding. If your land does not have approved planning permission, documents proving the possibility of securing the necessary licensing will be required. This may be in the form of precedents set by local councils who have approved similar schemes. If you have the experience but no capital, close to 100% of the funding can be arranged through profit sharing. There are also a number of loan products for more experienced developers when a bigger capital raise is required, whether it be here in the UK, Western Europe, or the US.
Get in touch
Your Financial Toolbox will work with you to find the best and most flexible solution for your specific project. We have vast experience offering various loan solutions that include JVs for profit-sharing when funds are limited for builders and developers, including acquisition, development, and construction loans. Choose from an array of bespoke and hybrid financial product solutions.
Our team of development loan specialists will help you find the best solution to get your project off the ground.
Contact us today to find out more.