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James Furniss, Commercial
Development Finance is a type of short-term lending that an individual or business will use to pay for the construction and development of a property.
At Principle Finance our close relationship with lenders will enable us to act efficiently with the aim to get our clients access to funding to help support any development or project they may be undertaking.
James Furniss Commercial
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Frequently Asked Questions
Here are a few of the commonly asked questions we get.
But if you need something answering you don’t see, contact us.
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Property development finance is a type of funding used to finance the construction, conversion or heavy refurbishment of buildings. The loan is usually set up as a short-term loan to fund the project only during the build.
Once the project has been built out, the loan is usually repaid through the sale of the property, or refinance to a residential, or buy to let mortgage.
The terms ‘development finance’, ‘property development finance’ and ‘property development loans’ are used interchangeably and all represent the same type of borrowing.
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Take on larger projects – By taking out this type of loan, you can put far less money into a project. It’s not uncommon to only put in 10% of the cost of the project, borrowing 90% loan to cost.
This means your savings don’t have to all be put into the project. This has two benefits:
- You can use those funds elsewhere as other opportunities arise
You are far less committed to the project financially. Generally, it’s never considered to be a good thing when all your eggs are in one basket, so diversification is key. Protect your savings by financing your developments.
- Increase your return on investment
Property development increases your return on investment. By putting far less money into the project and only reducing the profit a small amount, you will be getting a far greater return per £ invested.
Leveraging business transactions has long been used to get the best possible return on investment and it’s no different here. You can make your money work much harder for you by taking out property development funding.
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Bridging finance can often stretch to heavy refurbishments, but once external walls are being moved or extensions added, a full development finance loan is often required. Development finance will always require regular monitoring and structural work whereas a bridging refurbishment loan may not.
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Funds are usually released in stages, with the initial release usually used to purchase the site, or refinance any existing debt on there (where it is already owned).
Once the site is secured and the initial funds have been issued, the rest of the funds are released in stages to pay for the construction. On each release, the lender will check your progress against what you told them during the application process. To avoid issues, you should work as closely to your schedule of works as possible and inform the lender as soon as possible when you deviate from it.
The Financial Conduct Authority does not regulate commercial lending.