At UK Property Finance, our specialist stretched debt development finance solutions provide greater leverage than a typical development finance loan. Suitable for property development and construction projects of all sizes, our bespoke stretched senior debt development finance products are available for up to 90% loan to cost or 75% GDV.
With just a single set of legal and valuation fees, stretched debt development finance can be ideal for developers looking to minimise investments of their own equity. Working with an extensive panel of specialist lenders from across the UK, we negotiate cost-effective deals on flexible stretched debt development finance solutions for all purposes.
For more information or to discuss the potential benefits of stretched debt development finance, contact the team at UK Property Finance today.
Stretched development finance can be the perfect choice for investors and developers looking to stretch their own equity as far as possible. Borrowing up to 90% of a project's total costs allows for more on-hand capital to be allocated to other investments, while keeping the current project moving.
A flexible and affordable facility for experienced developers, senior stretch finance is useful for investors with multiple initiatives in mind, but with limited capital to deploy. Loans are available starting from 250,000 GBP and with no maximum loan size, with annual interest rates as low as 6%.
This can make stretched debt development finance more affordable than conventional development finance, particularly when looking to cover as much of the project's total costs as possible with one loan.
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.
There are no upper-limits to how much can be borrowed with a stretched debt development finance. Most lenders offer senior stretch finance up to a maximum of 90% loan to cost (LTC) or 75% of a project's gross development value (GDV).
The amount you can borrow will therefore be determined by the value of the project you intend to fund. Stretched debt development finance is a popular choice for developers looking to take on multiple projects at the same time without committing excessive sums of their own capital.
Terms, conditions and lending policies differ significantly from one provider to the next. However, typical features of stretched development finance that are common in most instances include the following:
Investors who take out development finance loans often need to 'top up' this senior debt with supplementary loans in order to cover the full costs of the project. This could mean taking out senior debt development finance and a separate mezzanine finance product, charged at two different rates of interest.
Stretched debt development finance differs in that it seeks to provide the borrower with a greater leverage. Rather than taking out multiple loans, stretched debt development finance can cover more of the project's total costs with a single loan.
All of which can save the developer time, effort and money over the course of the project.
Using Stretched debt is an alternative to using a "structured" funding package this might consist of Senior Debt and Mezzanine Finance. Often the loan amounts available across the two types are comparable. With Stretched Senior one lender provides the whole loan, whereas with mezzanine lenders participation there would be two lenders to deal with, and possibly two lots of professional fees to pay.
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.