Senior debt development finance is the primary source of funds issued against a property or development, in the form of a first-charge loan. As senior debt takes precedence over all other debts for repayment, it is considered a lower-risk facility on the part of the lender.
Junior or subordinated debt follows in priority, which is considered higher-risk due to senior debt taking priority for repayment.
At UK Property Finance, we have the extensive knowledge and experience needed to negotiate unbeatable senior debt development finance deals on behalf of our clients. Tailored from scratch to suit all requirements and budgets, our bespoke development finance solutions are suitable for new and established developers from all backgrounds.
While some lenders specialise exclusively in residential or commercial development loans, others offer a broader range of solutions to suit all types of developments. Across the board, we work exclusively with the UK's most established and reputable development finance specialists.
Senior debt development finance is typically available starting from around 50,000 GBP and with no specific upper limits. Negotiating throughout the application process is essential, in order to lock in the lowest possible interest rates and overall borrowing costs.
Our team will provide the full support and representation you need to get an unbeatable deal, irrespective of the size of the loan you need or its intended application.
When looking for development finance it is important to identify the type of project being planned by the developer in order to access the correct funding product. Types of works can include:
New builds nearly always require development finance loans. Once the project is completed, developers may use development exit finance as a more cost effective solution, but this cannot be done before the project is watertight.
for this type of project refurbishment finance is typically the correct type of loan to use, however if the project is larger than the norm, development finance may be a better alternative.
a refurbishment loan, which is a type of bridging finance, is generally used for property renovations. It can be used for various improvements including, installing a new roof, general structural changes, building an extension, refurbishment, and decoration.
Property investors or developers may want to buy property which needs development or completion work still doing and are unable to get funding from their bank. This is a typical scenario when a bridging loan is a suitable alternative.
Development finance loans are typically paid in one of the following three ways:
the total loan amount is paid in full, using the profits, when the project is complete, and the properties have been sold.
this usually happens when the developer wants to keep the development for either personal use or for rental purposes.
this type of short term loan is often used to fund a new development project before the current project is sold. It can also be used to give developers a bit of breathing space to complete minor works and find buyers.
Senior debt development finance is typically used as the primary source of funding for property development and construction projects. It is essentially a first-charge loan secured against the development itself, enabling the project to go ahead without the developer having to invest vast sums of their own capital in the build.
Even when a developer has more than enough capital to cover the costs of a project, it is often preferable to seek affordable funding elsewhere. This enables the developer to commit their on-hand capital to other projects and initiatives, in order to target the best possible short and long-term ROI.
A senior debt covenant places restrictions on the borrower for the full term of the loan as agreed by the lender and the borrower prior to the funds being issued. For example, it may be specified by the lender that certain activities can only be carried out once other parts of the project have been completed.
It is essentially an extension to the terms and conditions of the loan, with further 'rules' the borrower must abide by. In the event that any of these rules are broken, the lender has the legal right to demand immediate repayment of all money issued to date and refuse further support.
Senior debt provides a flexible and cost-efficient solution for covering the primary costs of all types of development and construction projects. It is one of the most affordable forms of development finance and enables investors/developers to hang on to their own cash assets.
There is also the option of topping up senior debt with other second-charge and third-charge facilities, such as mezzanine finance, effectively enabling up to 100% of the project's costs to be covered.
Having access to funds for property development purposes allows borrowers to take on bigger projects than they would usually be in a position to finance.
The purpose of the facility is to provide the developer with additional time to sell their completed development, while keeping costs as low as possible.
Qualifying for finance as a first-time developer can be challenging. This is why it is advised to seek support of an independent broker at the earliest stage.
Our products are suitable for large and small hotel development projects of all types, from repurposing existing properties to building new hotels from scratch.
Joint venture development finance works in a similar way to conventional development finance. However, no deposit needs to be paid and rates are typically higher.
Mezzanine finance, aka mezzanine funding, effectively enables property developers to 'top up' their first-charge development finance facility to access extra funding.
No Personal Guarantee (PG) development loans are effectively a form of unsecured funding for major property development and construction projects.
Whether your goal is to maximise the value of a property you plan to sell or to boost rental income long-term, a refurbishment finance loan could be just the thing.
Senior debt development finance is the primary source of funds in the form of a first-charge loan. It is considered a lower-risk facility on the part of the lender.
Stretched development finance can be the perfect choice for investors and developers looking to stretch their own equity as far as possible with borrowing for up to 90%.
'Light refurbishment' is used for cosmetic upgrades and minor improvements. 'Heavy refurbishment' is used to raise funds for structural improvements.
Commercial property development finance can be used to fund, build or develop a property or be used to expand your current business property or space.