Bridging loans are a form of fast, flexible short-term lending, usually for a period of 12 months or less, which can be used by individuals or businesses. Unlike normal loans, the interest on a Bridge is calculated and paid monthly or can be accrued and paid upon settlement. The loan can be used to “bridge” the gap in your finances until either a long-term financing solution can be put in place or alternative funds are received from another source, for example the sale of a property.
A Bridging Loan can be used in many situations, typically these are:
- To purchase a property or refinance quickly
- To purchase a property at auction
- To purchase a property that is potentially un-mortgageable
- To purchase a property before your current property has sold in order to not break the chain
- To fund a property refurbishment
- And many more!
Development finance works differently to traditional mortgages. It is a type of funding used to finance the construction, conversion or heavy refurbishment of buildings. The loan is usually set up as a short-term loan to fund the project only during the build. Usually, lenders assess the value of the property and then offer a loan based on that (GDV) and the borrower’s eligibility.
With access to a multitude of lenders across the development finance market, we know one size doesn’t fit all and ensure you receive suitable advice and the best possible terms for your project.
We can arrange funding from £25,001 with no upper limit. Development Finance applications are assessed on a case by case basis, based on the strength of the application, with the interest usually rolled into the loan.
Development Exit Finance
The purpose of Development Exit finance is to help repay any outstanding finance against a property development once the project is complete.
If your Development Finance term is coming to an end, and your development hasn’t fully sold as expected, development exit finance can be used to reduce finance costs to a lower rate. This type of product is becoming increasingly popular as rates drop, with development exit finance rates starting from 0.44% per month.
The products we offer can be utilised to release capital from a development before sales complete, meaning you can move on to your next project. Funds can be arranged very quickly where fast completion is a necessity in order to start your next development.
We can facilitate Development Exit finance from £100,000, with no maximum loan. Typically, we can arrange up to 75% loan to value (LTV) on residential or mixed use developments and can potentially push to 80% LTV for certain residential projects.
The total amount you can loan is subject to the value of the security offered and the planned exit route.
In general terms, the higher the LTV required, the higher the interest rate will be.
A Mezzanine loan is a type of loan that can be used to “plug the gap” if a Developer already has existing finance in place, but there is a shortfall in the funding. It can help to prevent delays and ensure the development is completed in a timely manner preventing expensive delays.
This type of loan acts as a second charge for the development and sits behind the primary lender. The majority of mezzanine finance providers will lend up to 20% of the gross development value.
Typically the breakdown of funding is as follows:
- Primary lender: 70% of the total cost
- Mezzanine lender: 20% of the total cost
- Developer: 10% of the total cost
As well as supplying the necessary finance to finish a project, a mezzanine loan can also reduce the amount of personal capital tied up in the project from the developer. Reducing the amount of capital invested in a single project may allow developers to take on multiple schemes at the same time, diversifying their portfolio.
A mezzanine loan is often suitable when a developer needs a more flexible type of funding solution as it allows greater freedom than other types of loans; providing a substantial amount of funding with terms that can be tailored to the requirements of the developer.
Why are they a popular type of finance?
- They can enable developers to secure the extra funding they need to finish projects
- Can be arranged and in place quickly
- Typically provide up to 20% of the GDV
- Repayment terms of 12-24 months
Like Bridging Finance, Mezzanine lenders usually provide the option for the interest to be “rolled up” and paid at the end of the finance term. This can help give developers peace of mind and avoid potential cashflow issues.