Categories: guides | development finance guides

Securing development finance for your project is a fundamental first step as a property developer. Whether you’re building a group of small houses, a large commercial complex or anything in-between, getting the right finance can be the difference between being profitable or not, so it’s vital to find the best option.

The decision faced by property developers is similar to those mortgaging. Do you go straight to a lender, or should you use a broker? 

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Why use a development finance broker?

Using a broker can be a real benefit. A broker offers a service where they find you the best loan you can get based on your needs and circumstances, from a wide range of lenders and product options. 

Access to a wide range of lenders

The best brokers have access to a broad range of lenders, all with different criteria, and interest rates. This offers you an array of flexibility in the borrowing you can get.

Get the best deals from across the marketplace

Having a wide range of lenders on a broker panel will also help you get the most competitively priced deal possible for your circumstances.

Benefit from insights into lender service levels

Working closely with lenders every day means brokers know how quickly their underwriting teams are at processing cases, how flexible they are on aspects of their criteria and more. This insider information can be critical to success.

Have someone else do all the admin and chasing

Development projects are a big undertaking, so to have to administer the completion of the finance is a lot of work and stress you could well do without. A mortgage broker team can not only do all of this for you, but can also involve the lender business development manager with any complexities of your case or to get help along the course of your application.

Identify creative solutions to complex problems

If you are struggling to raise a deposit, or find a lender due to a particular complexity with your case, a broker can help you investigate options and get you a clear and definitive answer on what you can and can’t do. Always use a specialist, as this is a complex area of lending and you need someone who fully understands the dynamics involved.

Enjoy a smooth transition to long-term finance

Where you are keeping the property/properties you have built, a broker can help you move smoothly from development finance to buy to let or commercial mortgages.

How to pick a good development finance broker

Not all brokers offer the same quality of service, here are some tips on finding a good broker:

Look at their reviews

A good way to gauge whether a broker is worth dealing with is by looking at what people who have already worked with them are saying. 

Reviews are a good way to get a true insight into the quality of a broker’s service, and provides expectations on what to expect when you work with them.

Don’t expect 100% perfection across the board, in fact if there is no criticism at all this could be a red flag, but looking at how criticism is dealt with by the broker will tell you as much about their service as excellent feedback. 

Find out about the range of lenders they work with

The whole point of working with a broker is to get access to as many development finance lenders as possible and to benefit from a great service. If a broker is tied to only a few lenders, this will narrow your borrowing options.

Be sure to ask the brokers you approach whether the range of lenders on their panel is reflective of the UK marketplace. You want to be sure any broker you work with has a broad range of lenders, rather than a restricted panel of just a few.

A good development finance broker should work with both high street and specialist lenders. High street lenders tend to take lower risk deals but offer keener interest rates. Specialist lenders offer more flexible borrowing options.

Look for a broker who charges a fee

Choosing a broker that charges a fee for their service is a good thing. Where a broker only takes their income from the lender procuration fee (the commission a lender pays a broker for preparing your application), there is always the risk that a broker may be influenced to place you with a lender that pays them the most. 

You want a broker that will always choose a products that meets your needs and requirements the best and offers you the most competitive financial solution, where a broker charges a fee they have no reason to be influenced by lender commissions.

Expect a broker to be thorough

A broker should take the time to understand your particular situation. This should be a thorough conversation, to ensure they don’t miss any details that a lender will need to know about your case. 

You may be surprised at the level of detail required, but bear in mind the size of the funds you are borrowing and the risk to the lender if they make a poor decision on an application. Lenders require brokers to provide a lot of information on your application, because the lender has to be confident about handing over money to you.

Therefore, a broker must present a detailed picture of you as the borrower, your financial position, your development plans and how you will repay the finance at the end of the term.

Look at how long they have been in operation?

Experience in the marketplace can make a real difference to the service you receive. As with any industry, the longer a business has been in operation the greater the stability of the firm. The amount of knowledge the employees have should be greater and the more established the firm’s relationships with lenders should be.

You can cross-check these suppositions with reviews of the company to establish your confidence that this is the case.

Talk to their staff

There is no better way to get a feel for a company than to talk to their employees. If you have a great deal of development finance knowledge you can press an advisor on what they know and how they can help you. 

But, even if you know very little, you can find out what level of support you are going to get, how helpful they will be at helping you get to know the process and walk you through the details in a way that you come away confident in what they are saying.

What documents will you need to provide a development finance broker? 

Once you have chosen a broker, and they have sourced a product best suited to your needs, they will ask you to provide certain documentation. 

The documentation that will be required will vary depending on the lender requirements, which differs from one to another. 

The most typical types of paperwork asked of clients include:

  • A schedule of works.
  • Evidence of previous experience with projects of a similar size and scope.
  • Written evidence of planning permission.
  • A valuation of the property/land currently & an estimated value at the time of sale.
  • Documentation detailing the construction costs.
  • A written plan detailing a viable exit strategy, i.e. how are you going to pay back the development finance?

However, it should be reiterated that this is not an exhaustive list – the paperwork asked for by a specific lender varies.

Give detailed and accurate information

Make sure you give thorough and accurate information – if you don’t, and an application is made for you by your broker, you will lose time and money. 

It will cost you money because an early part of the application process is a professional valuation, which the lender will charge you for. If the details you have given about your case are incorrect you may not be able to go ahead with that lender.

You will lose time, because additional work will need to be done with the lender, or you may have to start again with a new lender.

Adverse credit

A common downfall is undisclosed credit issues. If you have had any level of adverse credit in the last few years, discuss it with your broker. This is a common issue for a lot of people so there is no need to be embarrassed, your broker is there to help. 

It won’t remain hidden from a lender, as a credit check is another key part of any development finance application and happens early on in the process.

What’s more, some lenders are specifically set up to help clients who have experienced challenges with their finances, so also don’t worry that disclosing it will stop you going ahead with your plans.

How we can help

Commercial Trust has access to a wide range of lenders across the United Kingdom. This means by working with us you can expect to get a great deal matched to your current and long terms strategy.

With that in mind, we can also help with long-term financing, if you are intending to pay back your development finance and let out the finished property(ies). We can help you secure buy to let or commercial mortgages, depending on the property type.  

To discuss your project with a professional, get in contact with us now.