Securing the right funding is one of the biggest challenges encountered by any project developer. Apart from land acquisition and other construction aspects, it is necessary to have an appropriate financial structure in place. This feature can make or break the outcome of a project.
Pointers one should consider
In modern times, non-bank lenders are a boon to any commercial property developer. They are well-known for their specialized knowledge and flexible approach. At the same time, they are quick and adaptable. You may intend to plan a development or seek an evaluation of your funding technique. Commercial property experts can help you in obtaining the right deal. Develop a Commercial Property Development Finance plan with the help of portfolio managers. The following post is beneficial for developers and business owners who want to be acquainted with the vital means of this financing.
Gain an insight
If you have ever nurtured the belief that purchasing property or refurbishing buildings in the inner cities or near vital city centres are a cakewalk you are mistaken. Developers engaged in these projects encounter countless challenges that make them extremely tough to tackle. Navigating through stringent regulations, including building codes and other environmental formalities is one obstacle. You may have to deal with local authorities and external stakeholders. The process can be quite lengthy, even at the best of times. Minimise legal repercussions and grow your business with the guidance of Commercial Property Development Finance specialists.
Navigating through the financing structure
The financing structures are not simple. Numerous complexities may be involved. The developers are aware that raising finance for projects can be a challenging task. In modern times, the economic climate has become way more demanding than ever. Commercial Property Development Finance experts will help you become acquainted with the various lending options.
Way it works
The process involves a developer applying for a loan from a lending institution. The aim is to finance the land acquisition followed by property development. After the building is completed, the property may either be sold or utilized for investment purposes. Avail of the right finance structure in place with the aid of professionals possessing expertise in Commercial Development Finance.
Requirement of finance
Large projects need ground-up development finance. This category includes expenses in the purchase and construction. The project requires monetary resources from commencement until its completion. The completion may run into several months or years. The property development finance will meet approximately 70-80% of the building cost. The remaining portion will be satisfied through equity or subordinated loans.
What do lenders search for?
The specific criteria of each lender may differ. Some of the common features, however, may include the following.
Experience of the developer
The lender gathers information about the developer’s track record. How many of his past projects were successful? What is the extent of his relevant expertise? Does he have a solid grasp of the development process? Lenders get confidence if the answers are positive. If the developer’s project has the backing of an experienced team consisting of architects, solicitors, and contractors then it enhances credibility.
Estimated profitability
The lenders may examine if the developer can complete the project in a timely way within the budgetary threshold. They will also determine the potential profitability of the project.
Financial standing
The lenders examine the developer’s creditworthiness, equity contribution, projected cash flow, and leasing agreements minutely. All these aspects will have a significant impact on the financial feasibility of your project.
About the value of the security
The lender considers the value of the collateral for the loan. The value of the collateral must be sufficient for the entire loan amount.
Solid development plan
The developer must have a solid development plan in place and must have the support of architectural drawings along with proof of planning permissions. All the major contracts and agreements must be present. This indicates the project is well-planned.
Viable exit strategy
A viable exit strategy is necessary for lenders to curtail their risks. The lender’s decision is impacted by the specific market to which the developer belongs and the prevailing market conditions.
Submission of the application
After you submit your application, the lender will assess your project. They will investigate with due diligence. This process may include repeated visits to the site and risk assessments. They may pose additional questions or offer further documentation at this phase. Wait for your application approval. The lender will send you an offer letter highlighting the loan terms, including specific requirements.
In a nutshell
The right project finance will help you maximize your organizational returns. It will curtail your risk exposure. Seek the advice of a professional for successful navigation in this challenging process. Do not forget to allocate time to examine the feedback from past clients. The feedback will guide you in the decision-making process.
