Five of the best finance options for property developers

Whether you’re purchasing your company’s rented premises, renovating a property or hoping to grow your portfolio, having access to the correct funding is key.

Financial expert Mike Collins, who has 17 years’ experience in the property industry details some of the best options for your commercial project.

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Before delving into Goggle, you must go in with your eyes open – make sure you understand what type of finance your business needs. You’ll need to know how extensive your project is likely to be, how long it will take and most importantly, the minimum and maximum amounts it’s likely to cost.

Getting the right type of finance in place is crucial to the success of the property project you’re undertaking.

Commercial mortgages

Looking for a longer term to pay back the cash? A commercial mortgage could be the one for you.

This kind of finding is for purchasing non-residential properties such as shops, offices or warehouses with repayments spread over a fair number of years.

Normally, you will be expected to find a 30% deposit for a commercial mortgage, although it is possible to achieve a part-commercial which could cover a workplace and home, for example a flat above a pub.

Mezzanine finance

If you have a large project underway, you could benefit from mezzanine finance.

It’s a great way to plug a gap between your deposit becoming available and a loan being made available from a senior lender. In short, this could ne a finance solution for a shortfall in deposit, whilst you have cash retained for other properties you may wish to buy.

Bridging loans

This loan is a great way to ‘bridge’ a gap in finance. Let’s say you want to purchase a block of apartments but haven’t sold another set you need to release cash from. A bridge loan would also be the perfect solution if you wanted to sell a property at auction or pay for renovations or land for a property development.

Second charge loans

Second charge loans or ‘secured loans’ are an alternative way of raising this money to either extending an existing mortgage or remortgaging to a different, larger basic mortgage.

Generally, you would need to pay off your first mortgage’s repayments before paying back the second charge loan.

Auction finance

This is the kind of funding you will need to buy a property at auction to complete a purchase quickly.

After an auction, there is usually 28 days in which to complete a purchase. If you want to buy a property the conventional way it’s unlikely you could do it that quickly unless you had a cash buyer.

Be warned that you could be expected to pay around 10% of the purchase price but at least you can arrange the funding in advance.

This is handy as you will know your final budget before the auction ends.