A guide to the development finance application process

Applying for development finance is often a detailed and structured process, which can seem overwhelming if you’ve not been through it before. If you’re new to the process, here’s a step-by-step guide to help you understand how it works.

Step 1: Preparation

Before approaching any lenders, you’ll need to compile all the necessary information and documentation to support your application. This information may include:

• Project overview: A concise description of the development, including its location, size, and type (e.g., residential, commercial, or mixed-use).
• Development budget: A detailed cost breakdown covering land acquisition, construction expenses, and professional fees (such as architects, surveyors, and legal advisors).
• Project appraisal: Estimated gross development value (GDV) supported by evidence of projected profit margin and anticipated return on investment.
• Planning and design documentation: Copies of approved planning permissions and architectural drawings or site plans.
• Development team information: Profiles of the key professionals involved, including architects, contractors, and project managers.
• Financial statements: Up-to-date personal or company accounts, including statements of assets and liabilities for the developer or development entity.

Step 2: Source a lender

Your next step is researching lenders specialising in development finance who might support your project. Your options include high-street banks, specialist property lenders, and independent financiers.

If you engage a finance broker, they will do this work for you, significantly easing the burden. Your broker can reach out to potential lenders to gauge their interest and get feedback on your proposal.

Step 3: Submit your application

When you’ve chosen a lender, the next stage is to submit your formal application. You’ll need to complete the application fully and accurately, attaching all required documentation. If you’ve opted to work with a broker, they will handle this process for you and ensure your application is as robust as possible.

Step 4: Valuation and due diligence

The lender will evaluate the overall viability of the project. This due diligence process may include site inspections, credit checks, background checks, and a review of your development team’s experience and qualifications.

Step 5: Loan offer

If the lender is satisfied following its due diligence, it will issue a formal loan offer. The offer will outline the terms and conditions of the loan.

Step 6: Loan acceptance

You’ll need to review the loan offer carefully. Once you’ve accepted the offer, there will be a legal process to complete before funds are released.

Step 7: Drawdown

The final step, and the one you’ve been waiting for, is drawdown. You’ll receive the funds in stages aligned with construction milestones in the project. The first drawdown usually covers land acquisition or early construction. The lender may require a progress report or inspection before subsequent drawdowns.

Securing development finance is a structured but detailed process that requires careful preparation. Working with an experienced broker can significantly improve your chances of approval and streamline the funding journey.

For expert assistance with securing development finance for your project, get in touch.