Development finance is generally funded through the use of Term Loan or Commercial Bill finance.
It is a form of finance, which is under very strict scrutiny with the lenders/financiers, primarily because there are a number of individuals/companies attempting to develop properties without any prior experience or knowledge of the building industry.
Careful costing of projects including delays in construction all contribute to place stress on cash flow and financing in general, as you have to either cover or capitalise interest costs during the construction period.
The lenders and finance companies will generally want an applicant to use all of their own funds first, with the finance providers then providing their funding to complete the project.
Generally, 30% of funds/equity is to be provided by an applicant, however each deal is different and therefore is assessed on its own merits, therefore this percentage may change.
Funds will only ever be released by a lender if they are comfortable that there is sufficient funding available to finish the project in readiness for sale.
Depending on the size of the development and the applicants ability to service/repay a loan, most lenders will want unconditional pre-sales of units/factories within a development complex, prior to releasing loan funds, to ensure that they will have sufficient monies available to repay the loan provided to the applicant.
Development finance is available for, but not necessarily limited to, the following:
