“Money isn’t the most important thing in life, but it’s reasonably close to oxygen in the ‘gotta have it’ scale.” – Zig Ziglar

When it comes to your development project, financing is the number one thing that can make it or break it. This causes a great deal of stress and questioning to arise in the mind of the property developer. Questions such as: what finance options are available, how do you access them and how quickly can you get cleared finance?

Now when you sit with your finance broker, he or she will run through a number of options that relate to your specific needs. Here are just four of the financing options that might be mentioned:

#1 Senior Debt Loan

A senior debt loan covers up to the first 80% of a property development loan to value. It can be arranged against gross development value with additional security. You can defer interest payments and regular draw downs can be agreed in advance for small projects. Senior debt is so called because it has greater seniority or importance in the issuer’s capital structure than subordinated debt. This means, if the issuer goes bankrupt, senior debt must be repaid before other creditors receive any payment.

#2 100% Property Development Finance

You can get this finance in certain instances, such as where you own the land already, or the projected profits are above average. In these circumstances you can negotiate a bridging rate type finance or an exit fee based option without any need for a profit share.

#3 Mezzanine Loan

A mezzanine loan is a second charge loan (or subordinate debt) on top of the senior debt loan, hence the name “Mezzanine”. Very similar to a short term bridging loan, and often used in the same way, it enables one to fund development costs on one property while a developers’ capital is invested elsewhere. However, because they are higher risk the monthly interest rates will be slightly higher but you can achieve loan to value of as much as 90% to 100%.

#4 JV Finance

100% funding can be available on a joint venture basis where property development finance is provided to underwrite the project costs and share the profits on completion. How the joint venture is set up depends on what you are trying to achieve. A clear legal agreement setting out how the joint venture will work and how any income will be shared is drawn up. Entering into a joint venture is a major decision but it means experienced property developers can avoid the frustration of a valuable opportunity slipping through their hands.

In order to find the right finance package for you, you need the expert guidance of your finance brokers. That’s because different financing options have complexities and nuances that may cause you hassles and problems if not addressed up-front. So for example, funds can be released in stages and repayments can be deferred until such time as you sell the property, or secure a commercial mortgage based on the final valuation after work has been completed.

You may be able to get a commercial mortgage that will lend on property development. However, the distinct advantage of a specialist short-term loan is that you may be able to get the funds you need quicker, over a shorter term (where the loan is easier to redeem if you intend to develop and sell).

But don’t worry or be intimidated by the numerous financing options out there. Just book an appointment with usand we will be able to let you which one suits you best.