There are a wide variety of development projects that range from high-end residential to commercial and small to large, but one of the key things they all have in common is the importance of the right kind of financing. Many such developments fail due to a lack of funds at crucial times so it is imperative that those wishing to start their own project have the correct backing in place. Here we will take a look at how exactly development finance works and why it is the right way to go.
What is development finance?
First, we must look at what we mean by development finance. Simply put, this is the type of lending used by property developers to finance their projects. As mentioned above this can include a range of builds and renovations from the construction of offices, industrial units and factories to hotels, housing estates and single buildings. It can also refer to renovation and rebuilding as well depending on the individual’s needs.
Generally a loan that is meant for the shorter term, once your project is complete the loan would be repaid in full and with interest. There are many benefits of choosing this method of financing, including getting secured loans on builds that would not be possible through other means, the release of funds as and when needed and that it will save money against a longer term loan when you only really need the financing for a shorter period.
Remember, it is essential that you have the money necessary for the materials and labour you need exactly when you need them, and development finance is the best way to ensure this for yourself.
How does it work?
Unlike a more traditional loan where the current value of the land or property is assessed and an agreement reached, development finance considers the potential value of the development once it is complete. This allows you to borrow more than you might in other circumstances, and the structure of the agreement is also favourable to people who are about to build, rebuild or renovate a small or large project.
Most development finance involves staged drawdown of the capital, meaning you only take the amount you require when it is needed. This way you always have the right money on hand and you are not paying interest on more than you need. Further, it is possible to agree on interest payments to be folded into the final amount to be repaid, saving the hassle and expense of monthly repayments until the project is complete.
As a developer you can enquire and get all of the relevant information and requirements related to your own situation with ease and find out if development finance is the right solution for your build.
Whether you are looking for a smaller loan through to a larger amount development finance is the ideal way to fund construction, renovations and rebuilds to give your project the best chance of succeeding, so have a look and start financing your next project today.