Our short term bridging loans are for purchase, refinance, property improvement or to unlock working capital for business purposes.
This unique overdraft provides you with a flexible drawdown facility giving you instant liquidity and avoids heavy setting-up costs.
Individually structured loans for residential and commercial projects, with finance available for site purchase, construction and fees, refinance, equity release and to provide working capital. Loans are available up to 90% of the site cost.
Flexible first and second charge non-regulated loans available on terms from 3 to 5 years.
We have a commitment to innovation and with the ever changing financial landscape around us we have designed a range of unique Specialist Lending products that solve a range of property finance needs.
By Jonathan Rubins, Director & Chief Commercial Officer at Alternative Bridging Corporation
Development finance is an essential tool for developers seeking to maximise their property development return on investment (ROI). A well-structured development loan can provide the necessary funds for the purchase, refinance, and development of a property. These loans can also help to cover site costs, construction expenses, interest, and fees.
Development loans are specialised financial products designed to support property developers throughout the various stages of a project. Unlike traditional mortgages, development loans cater specifically to the unique needs of property development.
One of the notable features of our Development Loan is its flexibility, offering an extended sales period and the option for a top-up advance upon practical completion. Therefore, easing the financial burden as the process transitions from construction to sale.
Development loans can be used for a variety of purposes within a property development project. Primarily, they cover the costs associated with acquiring a development site, whether it is an empty plot or a property requiring significant refurbishment. Beyond the purchase price, these loans can be used to finance the construction phase, including materials, labour, and other expenses. They also can be used to cover interest payments during the development phase. This can ensure that cash flow is managed effectively until the property is sold or refinanced. The flexibility of development loans allows developers to manage their projects efficiently, from inception through to completion and sale and to maximise their property development ROI.
Before embarking on a development project, comprehensive market research is key. Understanding the local property market, including demand trends, pricing, and competition, is important for making informed decisions. Identifying the target market, whether it’s residential buyers, commercial tenants, or mixed-use occupiers, helps in designing a project that meets market needs and commands optimal prices. Additionally, keeping an eye on economic indicators and regulatory changes can provide insights into future market conditions, can allow you to plan strategically and mitigate risks.
Market research is not just about understanding current conditions but also about forecasting future trends. Developers should examine demographic shifts, such as population growth or decline, age distribution, and income levels in the area. You should also consider infrastructural developments like new transportation links, schools, and amenities, which can significantly impact property values. Engaging with local estate agents, attending property auctions, and reviewing property listings are practical steps in gaining a comprehensive market overview. Furthermore, understanding other developers’ pricing strategies can offer valuable benchmarks and help in positioning one’s development competitively.
A well-structured business plan is the foundation of a successful development project. This plan should detail every aspect of the project, from acquisition and construction to marketing and sales. It should include a comprehensive budget, timeline, and risk management strategy. Clear financial projections, including cash flow forecasts and property development ROI estimates, are essential for securing development finance and guiding the project to completion. A robust business plan not only helps in securing funding but also serves as a roadmap, ensuring that the project stays on track and within budget.
A thorough business plan should start with an executive summary, outlining the project’s vision, goals, and financial highlights. The subsequent sections should go into the project description, detailing the location, property type, and development scope. The market analysis segment should incorporate insights from the earlier market research, emphasising the project’s viability and potential profitability. The development strategy should outline the construction phases, timelines, and key milestones. Risk management is another critical component, identifying potential challenges such as construction delays, cost overruns, and market downturns. In addition, you should consider mitigation strategies. Finally, a marketing and sales plan should be articulated, detailing how the project will be promoted and sold to the target market.
Your credit profile plays a significant role in securing favourable terms for development finance. Lenders assess the creditworthiness of developers to gauge the risk associated with lending. Maintaining a strong credit profile involves managing existing debts responsibly, making timely payments, and avoiding defaults or financial mismanagement. A solid credit history demonstrates financial discipline and reliability, increasing the likelihood of obtaining finance at competitive rates.
To maintain a strong credit profile, developers should regularly monitor their credit reports and address any discrepancies promptly. It’s advisable to keep credit utilisation low and manage the number of credit inquiries within a short period, as these can impact credit scores. Transparent and detailed financial records are important, demonstrating to lenders a clear understanding of financial management. Additionally, establishing a track record of successful past projects can bolster your credibility and trustworthiness in the eyes of lenders.
Selecting the appropriate development finance option is critical to maximising your property development ROI. Our Development Loan is designed to meet the specific needs of developers, offering flexible terms and competitive rates. This loan covers the entire development process, from site acquisition and construction to the sales period, providing the ideal financing solution. The option for a top-up advance upon practical completion ensures that developers have access to additional funds if needed, facilitating the final stages of the project.
Alternatively, if you are looking to improve an existing property in your portfolio, our Heavy Refurbishment Bridging Loan may be ideal. These loans provide bridging finance that is suited for structural reconfiguration and extensions where planning permission is required. Furthermore, Heavy Refurbishment Loans can be used to convert commercial premises to residential investment use. These loans are available in the amount of £500k to £3.5m.
When choosing a finance option, developers should consider the loan-to-value ratio (LTV), interest rates, fees, and repayment terms. A higher LTV ratio allows for greater leverage, enabling developers to undertake larger projects with less upfront capital. However, it’s essential to balance this with manageable repayment terms to avoid overextending financially. Our Development Loan is designed to offer the flexibility and support needed to overcome these complexities, ensuring that developers can focus on delivering successful projects.
Another important option to consider is the use of leverage. Using leverage in this situation involves using debt to amplify the returns from a property investment. However, this decision should not be taken lightly as leverage will also multiply the potential downside risk if the investment is not successful.
Leverage allows you to benefit from the appreciation of an entire property while committing only a fraction of its cost upfront. As the property appreciates, the returns on the initial cash investment are significantly magnified. This approach portfolio diversification, spreading risk across multiple properties or markets while maintaining relatively low capital requirements.
For example, instead of developing one property outright, you could use financing to develop several properties, each contributing to overall equity growth and rental income. Over time, the compounding effect of appreciation and income from multiple properties can significantly enhance wealth-building potential.
Imagine if you invest £100,000 in the stock market, you will have £100,000 worth of assets, and if the value increased by 10%, you would make £10,000. Resulting in a 10% return on investment. Yet, if you were to invest that same £100,000 in the form of four 25% deposits on buy-to-let properties, you would have £400,000 worth of assets. When the property market goes up by 10%, you would make £40,000, a 40% return.
Another advantage is the ability to reinvest returns more quickly. By utilising leverage, you can conserve cash reserves, allowing you to take advantage of new opportunities as they arise. This strategic use of resources accelerates the pace at which an investment portfolio can grow, providing you with greater flexibility to respond to changing market conditions.
By conducting thorough market research, developing a robust business plan, maintaining a strong credit profile, and choosing the right finance option, developers can optimise their projects for success. Our Development Loan offers a comprehensive solution, designed to support developers through every stage of their projects. As a result, ensuring that you can achieve maximum ROI on your projects.
If you have any questions about our Development Finance options, don’t hesitate to get in touch with one of our BDMs. Alternatively, you can reach them on 020 8349 5190.
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