Plans and Site Drawings for a Development Finance UK Application
By including thorough site plans, the lender can visualise the project and assess the accuracy of the calculated costs.
The more accurate and detailed your site drawings, the more information available to the lender. They'll look at the layout, materials, design and complexity of the build to evaluate whether the budgets look appropriate for the scale of development.
It is highly advisable to use a professional architect or conveyancer to assist with your site plans.
Insufficient or inaccurate drawings will impede your chances of development finance approval. They may miss essential factors such as existing piping that will require extensive groundwork before your work can begin.
Planning Restrictions Impact on Development Exit Finance
If there are restrictions against what you can build or what materials you can use, identifying them at the application stage is beneficial.
Lenders will also need to know whether there are Community Infrastructure Levies payable. CIL payments make a substantial difference, as if the levy is high, it will impact the final profit.
Some regions have strict rules about materials used, particularly in ecologically protected areas, Areas of Outstanding Natural Beauty, or areas with a high proportion of listed buildings.
Researching the planning restrictions is vital since many towns have regulations protecting certain species or legislating new property builds. Hence, it's essential your lender can see that your build is fully compliant with all restrictions in place.
Costs and Budgets - Development Finance Calculator
You will need to include highly detailed budgets and not just an overall cost figure. The more detail, the better, and if this can be broken down into months or stages, all the more sufficient.
General overall costings aren't likely to be accepted since there is a high risk that the lender won't have enough information to evaluate the viability of your budget.
Suppose you do use total figures in any part of your application. In that case, it's wise to attach breakdowns and evidence or quotes to support those estimates and ensure the lender can see they have contingencies included to account for any unforeseen expenses.
Your Developer Experience
Most lenders will ask to see your development CV, and backing that up with evidence of previous projects completed makes for a much more robust application.
Previous experience improves your credibility, reduces the risk, and ensures that the lender is confident that you can successfully manage the property development.
However, you don't need to be an experienced developer. Some lenders will support first-time projects provided they have enough information and can see that you're working with professional contractors and architects with a reputation for quality builds.
Detailed Schedule of Works
When applying for development finance, you will need to agree on timescales with the lender.
Thus, they will need to know how long the development will take and when the significant stages will be complete.
A detailed schedule of works, accompanied by a budget breakdown at each stage, shows a well-planned development that is likely to run on schedule.
Even though many developments vary from their original schedule, these timings are essential for financing since they establish a rough framework for when you'll be expecting to draw down your next tranche of funding.
At each of these key stages, the lender will require a valuation and sometimes a building regulations inspection, so it's essential they have an idea about how many tranches there might be and at what expected intervals.
Development Team
Particularly if you are a new developer, the team you use - including crucial people such as the architect and contractor - will make a difference to the risk factor assessed by the lender.
If you include details of your team and their experience or professional background, this can improve your application.
Asset Schedule for Property Development Finance UK
Development finance lenders will ask for a summary called an ALIE - asset, liability, income and expenditure report.
This report is essential, so the earlier in the process you provide it, the better. The report matters since it shows whether you are financially independent and the contingency level there is to cope with any unexpected increased costs or time delays.
Lenders will also prefer to see financially stable applicants who can provide personal guarantees secured against other assets to mitigate their risk.
Exit Strategy Details for Development Exit Finance
The lender must know how you expect to repay the loan at the end of the term - whether that's through refinancing, remortgaging, or selling the property.
Exit strategies are vital. Without one, the lender has no idea how you plan to repay the short-term development finance, and they're very unlikely to approve your application.
If you plan to remortgage, having an agreement in principle based on the projected property valuation is a reliable way to show you know how you will repay the loan capital and that there is little chance your exit strategy will fall through .
Gross Development Value Estimate
GDV is a critical metric and shows the value that the property is expected to be worth on the open market once the building work is complete. This figure should be at least 20% above the project costs and ideally 30% or higher.
You'll need to have references from at least two local property agents supporting the projected GDV value. It is beneficial if you can include details of other property sales or valuations that back up your figures.
Personal ID Documents
Lastly, a UK lender needs to complete anti-money-laundering checks and will need information about your ID, deposit source and address.
Providing this information at the beginning will save the lender needing further documents later on in the process.
