When submitting a development finance proposal, it is essential to present a comprehensive package of information to the lender. Prior to that, summary details can be presented to establish appetite. But how much we can rely on any initial feedback will depend on the depth of detail presented.
Here are a few pointers for a development finance proposition:
Project Overview
Open with a narrative summary of the project to paint the picture. The ‘headline’ details will hopefully create interest and reassure the lender that it fits within its general criteria. The location, size and type of development in addition to the applicant’s profile and loan amount required will determine if it is a scheme the lender will consider further. Identify the target market and provide commentary to demonstrate that sufficient research has been carried out on demand for the finished units.
Developer profile
Does he/ she have the required development experience to give the lender the confidence that the project will be delivered on time, and within budget? A CV with project dates and basic financials should confirm a successful development history. An asset statement will demonstrate net worth and hopefully give the lender further confidence that this is a successful developer.
Financial summary
What is the purchase price (or redemption amount) for the land or property, and what is the current value? If the site is already owned, when was it acquired, and at what cost? Confirm the SDLT rate, whether VAT is applicable, and add legal purchase costs.
What are the build costs and total development costs? A contractor’s quote will provide detailed build costs. Professional fees, sales and marketing costs, and any other ancillary costs, should all be included in the total development costs, in addition to a contingency sum and costs of finance. Gross and net profits can then be illustrated, along with the anticipated return on costs or return on sales.
Once the financial summary has been considered, it is important to confirm how much cash or equity the developer has or will contribute to the project, and therefore what amount they are looking to borrow, and over what time period.
Shopping list:
Sales particulars or valuation (or a detailed description of the property, with pictures)
Land registry title number
Planning consent
Confirmation of number of units, storeys, beds & square footage for each property
Plans/ drawings
Financial appraisal
Cash-flow
Detailed build costs
Details of any S106 agreement
Contractors & Professional team details
Warranty details
Support for the GDV & demand via agents opinions and recent comparable sales.
Applicants/ Director’s profile
Company details, if applicable
Development CV
Solicitor’s details
A broker’s input is often essential to ensure the information is presented and packaged correctly, and to the lender’s requirements. A concise yet comprehensive summary is the first step to attracting lender interest, and therefore an important step in getting a development project funded.
Attributed to John Waddicker from Positive Commercial Finance: www.positivecommercialfinance.co.uk.
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