Those who are looking for property development loans can of course go to a bank as their first port of call.
However, you have to remember that while the bank is an expert in finance, they aren’t likely to have much expertise in property development. Nowadays there are an increasing number of specialist property development lenders. You may find it a better idea to look for one of these when applying for your property development loan.
• These lenders understand the ins and outs of property development and the problems that may face you as a developer.
• By going to a specialist lender, you have a much better chance of obtaining a higher LTV (loan-to-value) ratio. Under certain circumstances, it might even be possible to obtain 100 per cent.
• Because specialist lenders have a better understanding of the situation, they are likely to be more flexible if you encounter problems further down the line.
However, although you stand a better chance of a higher LTV ratio for property development loans if you go to a specialist, it doesn’t mean that they will hand out a loan just like that. There are a number of criteria that they will look for before deciding whether to lend, and how much to lend.
So how do you go about impressing your lender sufficiently to secure the maximum property development loans?
• Show them detailed preparations and a well-thought-out business plan. Make it clear that you don’t have your head in the clouds and that you have done all your homework.
• Be willing to listen to the lenders and deal with any questions or concerns they may have.
• They will need convincing about the potential profitability of the project. In particular, if you are looking for 100% funding, you have to provide very good reasons why you believe this is justified. You need to have facts and figures.
• Demonstrate that you have brought together a good team of professionals – architect, construction engineer, surveyor, etc. This is especially important if you are inexperienced.
• Show you are willing for the lender to monitor your project closely. You may find this irksome but it is a small price to pay for the provision of your funding.
Property development loans are a specialised form of lending. The best way to find a lender who can really meet your requirements is via an independent broker. You stand a good chance this way of finding the means to get your business up and running.
Please note that the FSA do not regulate commercial loans or commercial mortgages