As the name suggests, a property development lender is a high-net-worth individual or a group of lenders who help builders and developers with debt financing. Many platforms and websites have come about in recent times with an aim of securing funds and finance for property development.
Sqft Capital is one such website that helps property developers and builders connect with lenders and investors to raise property development finance. There are multiple and diverse property lenders and investors, all of whom are verified and carefully handpicked by Sqft Capital.
These lenders are not chosen solely based on interest rates, market factors and relationships. With that being said, here are the eight essential things that builders and developers should know about property development lenders.
Interest rates and IRR
Most lenders do not work on a fixed interest rate. Instead, most lenders are IRR driven, i.e. the internal rate of return.
Due diligence
Most lenders are not very proactive about due diligence and research. Instead, there is a team of external professionals such as surveyors and lawyers that do the needful.
Debt lenders
Putting together senior debt lenders and junior debt lenders is not an easy task. Both lenders will require a charge on the site, which is essential to protect their financial security if the builder or lender defaults on payment.
Funds are important
How and where lenders get their money from is of utmost importance. Not every lender has millions of pounds sitting in their bank accounts. So knowing how the lender is funded is crucial information.
Every lender has a different appetite
Every lender can ‘lend’, but every lender does not have the same lending appetite. Factors such as location, size of the project, type of scheme and self preference play a big role in the lending criteria.
Lenders and their Business Development Manager
Every Lenders’ Business Development Manager has a certain target that they need to meet every year. Based on that target, the business development manager has the right to accept or decline a deal.
Initial valuations are important
Initial valuations are just as important as actual figure valuations whether it comes to raising finance for property development or lending capital for property development, initial valuations matter.
Finalising deals take time
It can take months to finalise a deal because of the long and thorough information sharing process, paperwork, and fundamental legality.
