Qualifying for competitive development finance means putting yourself in the position of the lender in order to understand what they expect from an applicant. Ultimately, your job is to convince your lender that you are a safe bet – i.e. that there is little to no risk of them losing money by backing your project

As a very brief summary, what follows is an overview of the main criteria considered by development finance lenders when processing applications:

Borrower Information

Much of the decision made by the lender will be based on who you are and what you do, which means providing robust evidence of the following:

Your experience and track record to date
Evidence of successfully completed projects
Information on equity partners
Your capacity to complete the proposed project
Evidence of credibility and reputation

Construction Cost and Contractors

They will also want to see that you have taken all potential costs into account, and have involved only the most reliable contractors and third parties. Evidence provided must include:

Full details of all contractors and contributors
Experience and track record of all parties involved in the project
What type of contract (fixed price or otherwise) has been agreed
Evidence of appropriate contingency planning

This aspect of your application will also need to be supported by a full financial summary, including the following details among others:

The initial purchase price of the site or development
Projected value for the completed project
A detailed breakdown of all estimated costs
Estimated profit the completed project will generate
Expected gross development value (GDV)

The numbers count for a lot when applying for development finance, which is where the input of an experienced broker can prove invaluable.

Be mindful of the fact that even the most impressive numbers are meaningless, in the absence of reliable evidence to support them.

Planning Permission

A development finance application will not be accepted until the lender is satisfied that the applicant has obtained all required permits to go ahead with the project.

Even when planning permission has been granted, they will scrutinise the type of permit issued to ensure it covers the entirety of the proposed project.

Timing and Deadline

Understandably, lenders also need to know exactly when they can expect to get their money back. An accurate time frame for the project’s completion must therefore be presented, along with all necessary supporting evidence.

Development finance is issued in a series of instalments, tied with the completion of specific project phases. Therefore, you will also need to provide estimated timeframes and deadlines for the completion of these key project phases accordingly.

Exit Strategy

There is little more important to a development finance lender than evidence of a concrete exit strategy.

For example, you may have already lined up one or more buyers for the completed development, enabling you to repay the loan when the transaction completes. Alternatively, you may be planning to refinance your development finance loan onto a longer-term facility, in order to retain the property and let it out to tenants.

Either way, the strength of your exit strategy (and the evidence you provide to support it) will be a make-or-break factor for your application.