Securing the right finance for your property development project
From Senior Debt to Stretched Senior, Mezzanine and Equity providers there are more lenders in the market than ever before and with appetite to fund schemes in the North West.
But identifying the best lender suited to your scheme and obtaining support can often be frustrating, time-consuming and expensive. Very often developers can spend months looking for funding but have nothing to show for it or are let down at the last minute.
David Rainford, Director and property finance specialist highlights some pitfalls to avoid ensuring you secure the correct funding package.
Not being able to present a credible and thorough picture at the outset
A few lines on an email will illicit the same rushed response from a funder and any indication will simply be that and so heavily caveated it is not worth the paper it is written on.
Firstly, it is best to be totally frank in your dealings and present a ‘warts and all’ picture based on facts given it is far easier to mitigate issues at the outset rather than back tracking later.
A developer needs to demonstrate their experience through previous and current projects or if new to the sector the experience of their professional and contractor team.
And in respect of the scheme to be funded provide as much detail on the site, planning position, costs and sales values as possible early in the process,supporting numbers with appraisal-based evidence and comparable sales information.
Using pricing as the key funder benchmark
It goes without saying that funders (unless JV / profit share based) will want to see demonstrable ‘skin in the game’ into a project and pricing will be a function of risk / reward.
Developers need to look beyond headline rates which often can be misleading in terms of overall finance costs. Equally whilst the concept of a capital stack including different senior, mezzanine and equity funding stream can be cheaper the time, effort and cost co-ordinating the same can outweigh the benefits particularly if one party changes the goalposts during the process.
Also, a cheap funding offer which is not deliverable is no good to anyone
Not choosing the right funding partner
The key focus must be on securing a viable funding package from a lender who understands the scheme, buys into the location and borrower and fundamentally can deliver within the timescales.
Given the number of active funders and potential options this makes identifying the most appropriate funder more difficult. Location, scheme size, borrower experience, method of procurement, Guarantee requirements are all factors to consider in choosing the right funder aside from Loan to Cost, Loan to Value and pricing.
This is where advice from a party who has prior experience of a funder and their track record on delivery can be invaluable.
No two property developments are ever the same. There will be different timescales, different challenges and different financial requirements for each and deciding which product and provider is most appropriate for your circumstances can be bewildering and preparing the application can be complicated.
A well-presented application with the correct supporting information, pitched at the right level to a carefully targeted lender is essential and will maximise a developers chance of getting a firm offer within weeks rather than months.
David understands the need to secure the best deal when it comes to property development finance and is highly experienced in presenting to lenders on behalf of his clients and assisting in selecting the best provider.
For assistance or advice regarding securing property funding contact David Rainford at Cowgills on 01204 414243 / 07794490682 or email David.Rainford@cowgills.co.uk
The information was correct at time of publishing but may now be out of date.