What is Senior Development Debt?
Senior Debt Development Finance is the original type of property development loan where the lender takes a first charge over the property being developed. Funding is normally 65% of the Gross Development Value or a maximum of 80% of the project costs including an interest provision that is held back by the lender. Senior Debt is one of the the cheapest and best forms of development finance available on the lending market particularly where the borrower has a good deposit and can inject a good amount of cash on day one towards the land or property purchase.
Many lenders do request that the developer possesses a good level of prior development experience or at the very least if there are a number partners in the project that at least one person has previous experience. With more development experience lenders can give better access to a wider range of lenders offering a wider range of products. If none of the developers have existing experience there are lenders who can consider first time developers as they offering specific products to first time developers.
Property residential developments are most preferred by most lenders but there are options for mixed use, commercial, student accommodation, leisure, care home and industrial developments all across the United Kingdom, Europe and also Asia. Currently there is a massive range of first charge development finance facilities, with options to suit a vast range of circumstances.
What Can Senior Debt used for?
There are so many different types of lenders that offer senior debt financing. These range from High Street Banks, challenger Banks, specialist lenders and family offices all providing senior debt to individuals, businesses and specialist developers. Senior debt loans can vary pretty dramatically from lender to lender, and the cost of the loan can be determined by the Loan to Cost or Loan to Value. The experience of the applicant developer as well as the location, size and type of development will all be included in the particular terms that are offered by the relevant lender based on their lending criteria. With such a wide range of development finance lenders in the funding marketplace, each with their own parameters and criteria the rates and fees can vary across the lending range.
What are the Key Features of Senior Development Debt for Developers?
- Arrangement fees from 1%
- Interest rates from 4% per annum
- Typically up to 65% of GDV, or 80% of project costs
- Options with no Exit Fees
- Up to 24 months, or longer by agreement
- Options with no Personal Guarantees.
- Minimum loan £50k, with no maximum loan size
- Full UK Coverage. (For Europe, Asia and the United States terms will differ)
- Valuation and Surveyor fees case by case.
Common Terms For Senior Debt lending criteria?
- Greater development experience gives access to cheaper rates
- Adverse credit can be considered
- First charge lending only
- Multi-unit schemes preferred, but single units can be considered.
- Executive residences can be considered.
- Detailed planning consent must be granted
- Residential, mixed use, commercial, student, care home, industrial etc all considered.
- UK countrywide coverage as well as many other countries.
What Information Will I Need to Progress My Case?
- Applicant company name & Ltd Company number.
- Full site/ property address.
- Directors & significant shareholders CV’s or Biographies.
- Copy of the planning consent.
- Financial Appraisal (can exclude finance costs) and Cash-Flow.
- Detailed build costs.
- Schedule of proposed Accommodation.
- Details of the professional team (contractor, architect, structural engineer, CDM coordinator etc).
- Any comparable sales information (or agent’s opinions) to support the proposed GDV.
- Procurement Method ( Design & Build or Construction Management?).
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