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Lender Criteria for Development Finance

What do lenders look for when they assess a development finance application – and why will knowing the qualification criteria go a long way to improving your approval chances?

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-07-17
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Lender Criteria for Development Finance

Finding the right lender for a property development project is always easier with an experienced broker in your corner.

The Revolution Brokers team has years of experience in construction mortgages and can help with every aspect of planning and financing your development!

Here, we summarise the significant lender criteria to understand before you apply and select a mortgage provider - aiming to help you understand what a development finance provider will look for and what might be a deal-breaker in your application.

For bespoke assistance with negotiating competitive lending for any size of the development, give the team a ring on 0330 304 3040, or email us at [email protected].

How Does the Application Process Work for UK Commercial Development Finance?

Let's run through exactly how it works; from deciding to apply for funding to develop a property, through to work beginning!

  1. First up, you'll need to have at least an idea of budgets. It's essential to have an indication of how much your development will cost, what you'd expect to sell it for, and therefore how much profit is involved.
  2. Next, we'd recommend contacting the Revolution team to discuss. Our development finance experts will take a look at your calculations, ask any questions that we know a lender would ask, and start identifying the best sort of financing for your project.
  3. Once we've taken a look, we'll give you some estimates of what sort of interest rates and fees you can expect to pay in today's lending market. If you're happy that the indicative costs are viable and competitive, we can shoot over a written quote. That includes all the interest rates, fees, terms and a list of all the paperwork we'd need to proceed.
  4. If you decide to go ahead, we'll work with you on the application. Revolution Brokers creates a full report to accompany the application, pre-empting any queries or concerns we'd expect the lender to have.
  5. Provided the lender is happy, they'll usually ask to come for a site visit and meet with you. This step is worthwhile since it gives the lender a better idea of your plans and allows them to get better involved with the project. Don't worry; we'll help organise this all!
  6. Following the site visit, the representative will report back to their teams, including the underwriters responsible for finalising terms and assessing the risk level. Once the approval goes through the underwriters, you'll get a formal lending offer - with details of what else will be needed, such as a property valuation and legal paperwork.
  7. A surveyor will need to visit the site to carry out a valuation. This process can take a little while as they'll report both to you and the lender on what they think the property (or land) is worth now, what it will cost, and what you can expect to sell it for.
  8. When the valuation comes back, the application goes to the legal stages. That means giving the paperwork and offer to your solicitor, checking you understand all the clauses, and sending back a signed acceptance.
  9. That's it! Once all the signatures are received back, your facility will be live, and you will be able to draw down your first tranche of funding.
  • Loan details
  • help If the land was purchased within the last 2 years for less than the current land value, we will lend up to 65% of this figure
  • Initial Loan (day 1) must be less than 65% of Initial Land Value (day 1)
  • help Minimum 6 months
  • The LTGDV is higher than 70%. Please review the Initial Loan (day 1), construction costs and gross development value fields.
Instant Results
GDV 0
Initial Loan (day 1) 0
Total Loan Amount 0
LTGDV 0
Day 1 (LTV) 0
Margins at 0
Build Term (months) 0
Minimum Term (months) 0
Assumed arrangement fee @2% 0
Admin fee 0
Exit fee 0
Net Day 1 Advance (after deductions)* 0
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How Do Lenders Assess a Developer Finance Application?

There are lots of different criteria that a lender will consider before they offer to lend.

These can vary significantly between lenders and development projects, so the rules on what will and won't be accepted are not written in stone.

It's essential you know what the criteria are before you apply. Suppose you don't qualify for lending with one development finance provider. In that case, chances are you will with another, and it's a case of evaluating which lender is most suitable for your borrowing needs.

Unfortunately, making multiple applications on the off chance that one will offer approval isn't a successful scenario. You could end up with numerous hard credit searches in your credit report, which makes it less likely you'll secure your funding.

The best way to assess which lender will approve your borrowing application is to work with an independent broker who knows the criteria and can match your circumstances with a lender - without the legwork!

Contact Revolution Brokers if you've been turned down for development finance. We'll work with you to establish why, find a more appropriate provider, and reinforce your application to address any issues that cropped up the first time around.

Why Use a Development Finance Broker?

A development finance broker such as Revolution Brokers is an independent specialist, working directly with thousands of lenders to secure competitive deals on behalf of our client.

Please note that not all brokers are independent or whole-of-market, meaning they act more as a salesperson on behalf of a lender and won't necessarily be able to find you broker-exclusives outside of their limited lender range!

As your broker, we act as an advocate for your development finance application. That means pointing out where the application can be improved, helping you assess the pros and cons of different borrowing projects, and ultimately get the financing you need at the most competitive rates available.

Common Assessments to Determine Development Finance Rates

  • How much do you want to borrow? Most lenders will offer from £50,000 upwards.
  • The length of the development project - typically anything from one month to three years.
  • Security - the more security you can offer, the lower the risk of the loan. Having planning permission in place is also a good security factor.
  • Your circumstances. Development finance lenders usually lend to private applicants, pension funds, limited and partnership businesses, and offshore companies.
  • Your age - you must be over 18, although a Special Purpose Vehicle business can usually borrow without any trading history.
  • Where the development is based, Revolution Brokers works with lenders across all UK countries.
  • Your credit rating - provided you don't have a severely adverse credit history, your development finance approval will rely primarily on the viability of the project itself. However, bad credit might mean less competitive terms.
  • The development project type; working with a whole-of-market broker such as Revolution means we'll match you with a lender for any build, from a complete new-build to a conversion.
  • Whether you have planning permission - you can get development finance without it, but usually, it is easier to finance a project that has the approvals in place.
  • Your exit strategy. The lender needs to know how you will pay back the loan (i.e. whether you expect to sell the development). They'll also verify the value of any repayment vehicle to ensure it's viable.

Expert Support with Development Exit Finance Applications

If you're unsure about whether you can meet the standard lending criteria, or need personalised support with creating a successful development finance application, contact mortgage advisors.

Applying for financing on any development project can be stressful, and it's highly beneficial to have an expert on your team providing independent advice to ensure you aren't paying any more than the best rates on the UK market.

We work with all sorts of developers, from experienced commercial clients to first-time private developers and are available on 0330 304 3040 or via email at [email protected].

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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