How much does it cost?
The main fees to consider are the arrangement fee, the exit fee and the interest rate.
The arrangement fee and exit fee are a percentage of the loan value, typically 2% and 1% respectively. These fees are often deducted from the day one cash advance which is something to be aware of when calculating how much you will receive on day one.
Interest rates are normally presented on a monthly basis with development finance. The interest is charged in arrears can either be serviced monthly or rolled up and deducted from the initial advance and repaid at the end of the term. If servicing the loan, you may be asked to demonstrate how you plan to do so.
There are likely to be other associated costs to consider like legal fees and valuation fees.
What are the benefits?
The obvious benefit of development finance is that it allows you wouldn’t have been able to fund from cashflow. This means you can take on bigger and better projects that will ultimately allow you to make more profit. Of course you will need to contribute some capital towards the project but sharing the burden with a lender means you can keep some cash in your reserves to cover budget overruns or to take advantage of any great opportunities that come your way.
• Finance to purchase the site and for build costs
• Designed for experienced developers
• Loan of up to 70% of gross development value (GDV) available
• Interest can be serviced or rolled up until the end of the term
• Terms of up to 24 months
• Loans from £300k upwards
• Clear exit plan required from the outset
• A first charge on the site will be taken