Development Finance
Development finance products can be provided by a range of institutions, including high street banks, challenger banks, private investors, family offices and other organisations. These products can take many different forms, such as loans, equity investments, and guarantees.
The goal of development finance products is to provide access to finance, addressing the financing gap that often exists and to unlock new opportunities. Overall, development finance products play a critical role in supporting both first time developers and well established developers to reach their goals by offering finance suitable to their requirements.
If you are a property developer or housebuilder looking for finance, you undoubtedly have come across the many names given to different types of development finance and associated terminology that you won’t find in any dictionary. This language can quickly leave you feeling completely confused and lost, resulting in a roadblock that hinders getting your project off the ground.
Here we break down the jargon and terminology so that you can understand what types of finance are available.

Senior Debt
Don’t let the many different names leave you feeling confused, they all mean one thing; development finance. These are delivered on a first charge basis and support you by funding up to 100% of the build costs + associated fees and up to 70% of the land/site value.
All lenders have set parameters regarding loan-to-gross-development-value (LTGDV) and loan-to-cost (LTC). Depending on a lenders risk appetite, will depend on their LTC position but typically, most look up to 85% LTC with some going as high as 95% LTC.
These loans typically cover most of the funding needed to complete a development project and allow for works to begin. Depending on your cash position will depend on how much gearing you need on your project, however gearing can also be dependant upon the number of projects you are hoping to take on. By stretching your borrowing amounts, you can push your capital further and either take on bigger sites or more sites at one time.
We have helped many clients become developers, as well as supporting experienced housebuilders increase their output, resulting in greater profit margins, if you want to maximise your growth potential, come and have a chat with us!
Mezzanine Finance is used to help bridge the gap between a development facility and the amount of equity or funds that a developer has to invest in the development. This is a form of second-charge debt most commonly used by developers and housebuilders to provide top-up funds for a project they need more capital for. This is a short-term form of borrowing, and most lenders/investors will expect the debt to be settled within 12-24 months.
Mezz carries higher costs than development finance as their money goes in to the project first and is repaid last, therefore they carry greater risk with their capital input. Many mezz lenders will consider funding up to 75% LTGDV (their funds combined with the 1st charge lenders funds)

Mezzanine Finance

Part Complete Development
Finish & Exit
This type of finance is utilised when you face unforeseen issues on your development and are in need of additional time and/or money. Lenders will utilise the same leverage points as they do on a development facility but are able to increase the borrowing potential by utilising the funds you’ve spend to date to offset the loan-to-cost calculation.
A few of the typical reasons for why you would need this type of funding option:
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Cost Overruns
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Delays with materials arriving on site
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Lack of funds to complete project
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Main contractor unable to deliver project
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Construction delays
This type of finance is also ideal for buying sites that others have started and are unable to
deliver in full.