- 100% development finance allows you to get full funding for your project with no deposit but requires a strong business case and track record.
- The key criteria for getting this finance is prior project experience, full planning permission and significant equity or secure assets.
- Joint ventures can provide alternative funding by combining resources from multiple parties, better project management and risk sharing but comes with potential conflicts and reliance on partners.
What is 100% Development Finance
100% development finance means getting full funding for a property development project, from land acquisition to construction, with no deposit from yourself.
This can be a lifesaver for property developers as they can do bigger projects without needing huge upfront capital.
But getting this finance is complex and subject to certain conditions, often requires a proven commitment and a detailed appraisal of the development site, costs and timelines.
Getting all construction costs covered with no deposit is tempting but 100 development finance requires thorough planning and a strong business case. Lenders scrutinise the project’s viability, profitability and the developer’s track record before they offer full finance.
There’s two main routes to getting the funding level to 100%:
Have other assets
A lender will only go up to a certain percentage against a projects GDV. This leaves an amount unfunded. If you have other land or suitable assets then these can be used to raise additional funds.
Having a blended funding package is quite normal, so its possible to have the property development finance as the senior debt loan, then utilise a bridging loan to borrow against other assets.
Or, some lenders will be happy to provide all of the funding by taking a cross-charge over multiple land and property.
Use a JV Solution
Here, instead of a simple development loan, the joint venture equity partner injects capital directly into the project for a stake in its success. Covering both the land acquisition and build costs.
Eligibility and Application
To be eligible for 100% development finance property developers must meet strict criteria that proves their capability and credibility.
Lenders look for a proven track record of property development projects. This history proves to lenders that the developer has the experience and skills to manage and complete the proposed project.
A full business plan and feasibility study is part of the application.
These documents should outline the project scope, financial projections and expected gross development value (GDV) which must be at least £1 million. The business plan should also include an exit strategy, selling the property or refinancing with a traditional mortgage, to show how the loan will be repaid.
Full planning permission for the project is another key requirement.
This means the development is compliant with local regulations and ready to go without any legal hurdles or delays. Lenders may also require a personal guarantee from the developer which adds an extra layer of security for the loan.
The application process involves submitting a full proposal to a lender or development finance broker. This proposal should include the business plan, feasibility study, financial projections, planning permission and details of the developer’s experience and track record. A clear and well structured exit strategy is also required to convince lenders the project is viable and the developer can repay the loan.
Joint Venture Development Finance
Joint venture development finance (also known as joint venture finance) allows developers to finance projects without using their own funds by combining funds from multiple parties.
This type of finance is perfect for developers who don’t have the funds but have the expertise and vision to do a property development project.
Joint ventures allow multiple parties to share the financial risks and rewards of property development projects. This collaborative approach can get you more funding for larger projects.
However, joint venture partners usually require developers to have completed at least one project of similar size and scope and have detailed planning consents in place before they consider a project.
Joint Venture Benefits
Joint ventures have several benefits, profit sharing that shares the financial risks of property development.
Commonly profits are split 50/50 between the developer and the joint venture partner, so both parties are invested in the project’s success. Lenders also prefer joint venture projects with a Gross Development Value (GDV) over £1 million so it’s easier to get funding for larger and more profitable projects.
Combining expertise from different partners in a joint venture gets better project management and execution, more likely to succeed. Each partner brings unique skills and resources to the table, makes a stronger and more versatile development team.
Joint Venture Risks
Despite the benefits, joint ventures also have its risks.
One of the biggest challenge is the dependence on partners which can create problems if other have different goals or risk appetite. This can lead to conflicts and disagreements that can affect the project direction and success.
Developers must consider these risks and have clear joint venture agreements to mitigate potential conflicts and have a smooth collaboration.
Managing Financial Risks in Projects
Property development projects have financial risks but developers can manage these risks proactively.
First step is to do market research and analysis. Understanding the demand for the project and the local property market will help developers make informed decisions and avoid mistakes.
Having a comprehensive business plan and feasibility study is key. These documents should detail the project scope, financials and potential risks. Getting planning permission and regulatory approvals before starting the project is also important to avoid legal issues and delays.
Monitoring and managing cash flow throughout the project is another risk management aspect. Developers should keep an eye on expenses and revenues to keep the project on track financially.
Working with a JV partner or development finance broker can also share the risks and benefits of the project. Joint venture partners brings additional resources and expertise, development finance brokers can get better financing terms.
Specialist Brokers
Specialist brokers play a big role in getting 100% development finance by using their market knowledge and connections to find the right finance.
These brokers have access to specialist and private lenders and can tailor the loan to the specific project requirements. Working with a specialist broker will increase your chances of getting the funding.
Lenders for 100% Development Finance
Several lenders offer 100% development finance, each with their own terms and conditions.
Bridging Finance London provides funding for residential developments, commercial properties, mixed-use developments and niche property sectors such as Purpose-Built Student Accommodation and Build to Rent schemes.
Loan amounts for development finance from £250,000 to £250,000,000.
Borrow up to 70% LTGDV, funding for up to 95% of total costs. Development loan terms up to 36 months, longer terms available for suitable projects.
