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Commercial Development Loans: The facts

Published on 16th September 2019

If your business operates from its own premises, you’ll want to make sure that the property serves your needs. After all, it’s where you welcome your customers and produce your goods and/or services. However, as your business develops you may find that your current facilities are no longer sufficient to enable you to keep up with customer demand. Of course, you could try moving elsewhere, but that can be expensive and you may already be in a prime location. Instead, a more cost-effective solution might be to redevelop your existing premises with the help of a Commercial Development Loan. Commercial Development Loan come in a variety of forms and are designed to provide the funds so that you can adjust and/or expand your existing premises with total confidence.

Why should I apply for a Commercial Development Loan?

Although redeveloping your existing premises may cost less than deciding to move your whole business to another location, making improvements to your current commercial trading address can still prove an expensive endeavour, especially when you factor in aspects such as planning applications, architect fees, surveyor fees, contractor salaries, cost of building materials and the amount of disruption to your business. However, rather than relying solely on your own savings, you could spread out the cost of the project over a short or long-term agreement by applying for a Commercial Development Loan. Therefore, a Commercial Development Loan is a means of easing the strain upon your business’ finances whilst enabling you to make the changes that are required.

What can a Commercial Development Loan be used for?

What makes Commercial Development Loans such a useful tool for any business owner looking to make improvements to their existing premises is that they can be used to support any type of property development project. So whether you’re looking to improve customer-facing areas, build extensions, increase the size of your stockroom, reposition weight-bearing walls or ensure that the property complies with modern building control regulations, a Commercial Development Loan could provide you with the funds you require. Plus, if you’re an experienced property developer looking to construct property such as new homes, a Commercial Development Loan could also assist here as well. So, all you need to do now is source an agreement that’s suitable for your business’ needs.

Thinking about making an improvement to your business premises? Or are you looking to devleop land in your possession? Apply for a Commercial Property Loan or learn more about how your business could benefit

What types of Commercial Development Loan could I apply for?

If you don’t want to move to another location or are looking to build property, a Commercial Development Loan could offer you the funds necessary to succeed. However, there are two types of Commercial Development Loans available to choose from, which are: Development Mortgages and Development Bridges. So in order to make an informed decision and acquire the funds you need, understanding the differences between these two types of loans is crucial.

Development Mortgage

If the project is in relation to a property that is considered habitable but needs extensive modernisation, or the construction of an entirely new property, you may want to apply for a Development Mortgage. A Development Mortgage is a long-term agreement that can last up to 20 years and is typically secured against the property itself and/or another property in your portfolio. Although such agreements typically offer up to 60% LTV, 100% LTV is achievable, but you may need to provide additional security and know that the quality of the land/property will also be brought into question.

Nevertheless, though there’s no limit to how much you can borrow, the amount of funding you may receive will take into account the project’s Gross Development Value (GDV) when complete. Plus, you’ll need to be aware that you need to place some of your own equity into the agreement as well, which could be up to 40%. In addition, you’ll also need to make Fixed Monthly Repayments throughout the agreement. The amount of interest you’re charged may vary depending on whether you’re using a Fixed or Variable Rate Mortgage.

Development Bridge

On the other hand, if you’re looking to carry out a light redevelopment, undertake a renovation or fund a major conversion project, you may want to take a look at what a Development Bridge has to offer. A Development Bridge is a short-term agreement that can last between 1-12 months and could be arranged to support up to 100% of the project’s total costs. Typically secured against either the property in question or another in your portfolio, Development Bridges are high-interest agreements that can be established as a Closed Bridge or an Open Bridge.

  • Closed Bridge: Using a Closed Bridge means that you’re expected to fully repay the agreement by a set date.
  • Open Bridge: With an Open Bridge, you aren’t tied to a specific date but you are, however, expected to have fully repaid the product within a prescribed term (e.g. 12 months)

Meanwhile, you also need to consider how you intend to repay and resolve the interest that’s incurred until the agreement has been resolved. To do, you have 3 options available: Pay Monthly, Rolled-Up Interest or Retained Interest.

  • Monthly Interest Payments: This option requires you to make interest payments at the end of each month until the agreement has been resolved.
  • Rolled-Up Interest: Combines the Principal (capital borrowed) with the total amount of interest that’s been incurred, which is repaid in full via a single repayment when the agreement matures.
  • Retained Interest: This option enables you to borrow the interest you’ll incur for an agreed number of months. This is kept by the lender and is used to provide your business with a safety net whilst you make monthly interest payments. When the agreement matures, the lender may reimburse a portion of the retained interest, providing that it’s not been used up and/or you’ve managed to repay the agreement early.

Thinking of applying for a Commercial Development Loan?

Commercial property in the UK is a valuable commodity for any business, providing a wide range of benefits. That’s why, if you manage your own premises or possess valuable land, you are likely to want to make full use of it. The trouble, however, is often in the cost. But if you’re looking for a cost-effective way of achieving your property development goals you may want to consider applying for a Commercial Development Loan. All you need to do next is source an agreement that’s appropriate for your goals, which is why speaking with qualified business finance professionals could help.

At Rangewell, we’re an Access to Finance specialist who’s mapped over 400 lenders to offer you an overview of more than 23,000 business finance products. Our services are free to use and we’ll also use our expertise to guide you through the application process. So if you’re looking make improvements to your premises or build on land in your possession, apply for a Commercial Development Loan today or find out more with Rangewell.


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