Continuation Property Development Finance
Funding for your development project when your cash runs out
Current terms available
- 1 to 24 months
- £500K to £10m
- Staged funding
- Up to 60% of the Gross Development Value
All types of development
- Residential and commercial
- Ground-up newbuild
- Greenfield and Brownfield
Versatile to fit your needs
- Interest roll-up schemes
- Staged payments
- Available fast
- Expert support
Experienced property developers, builders with a project or property owners with redevelopment plans - you should know that even the most carefully prepared costings can fall short once work startsExperienced property developer, builder with a project or a property owner with redevelopment plans, you should know that even the most carefully prepared costings can fall short once work starts.
Arranging the right level of finance is the first step to a successful building development project. A careful costing of the work required will be essential to reassure a lender that your approach to the project is professional. You should be able to provide costs for each stage of the project, carefully broken down to cover every item and the labour required.
But you will want to keep your borrowing to a minimum to keep your costs under control, and so maximise your eventual profits. This can lead to problems if your estimates don’t keep pace with the reality, and costs over-run.
Property owners can find that projects that they thought they had sufficient resources to cover mean major additional costs.
Why do costs over-run?
You may have started on a project that you believed could be funded by your own resources - or have borrowed to buy land or property and to cover the work required.
There are many reasons why property development might not run to budget. They might be minor. If you are redeveloping an old building, an unexpected rot problem can mean extra work and new joists and floors. However, they could be more costly if structural instability is discovered and bracing and underpinning is required - and much more costly again if demolition and rebuild is the only answer.
It is not just the unpredictability of old buildings that causes problems. On brownfield sites particularly, unexpected work below ground level can eat up money before a new build has even reached past the footings.
You could even face problems if an archaeological survey on your land is ordered - you could be billed for the work and face months of delay with lenders to repay.
Of course, you will always include a contingency within your initial costings, but when problems really arise, the contingency can be eaten up very quickly.
You can’t simply walk away from a building site when you have no funds to continue the work. The lenders who provided the initial funding will be ready to seize not just your abandoned project, but whatever other property you might have used to provide security.
At Rangewell we can help provide a solution if your development project requires extra funding.
Additional funding to deal with the unexpected costs
When you need additional funding for a development project, you could face high costs.
Lenders may be concerned by the fact your initial estimates were inaccurate. They will be wary of advancing further sums when there could be additional unforeseen problems ahead.
At Rangewell, we can work with you to find the lenders who may be prepared to help, and to find those who can advance the funds you need for the lowest costs.
If you are already borrowing:
If you have already arranged a loan to fund your project, it may be possible to go back to your original lender to ask for additional funds. These may be provided at a rate comparable to that of the initial loan. However, in most cases, a solution such as a Second Charge Bridging Loan from another lender will be required, and costs may be higher.
A ‘first charge’ is the primary mortgage or other loan secured against the property - the loan you arranged to start the project. This takes precedence over all other finance secured against it, which means that it will be repaid first.
If there is sufficient equity in the property, however, then a ‘second charge’ loan could be secured against it. This will be a loan secured on the value of the property, structured as a short-term loan - but because your primary lender will be repaid first, the risk to the lender making a second advance will be higher - and the costs of the loan will be higher as a result.
Second Charge Bridging Loans may be available from 0.85% per month and upwards. In addition to the monthly interest charges, the lender will usually charge an arrangement fee of 2% of the loan amount. Fees for inspections by valuers and structural engineers may be required.
If you have a project in hand without borrowing:
If you already own land or an existing building it may be possible to arrange Development Finance after the work has begun. A solution such as a Commercial Mortgage may not be suitable, despite the fact that it might offer the lowest costs, as the property will not be usable, and therefore mortgagable, once work has begun.
However, the value of the property you already own will make it possible to provide other types of suitable funding.
For light and heavy refurbishments, you might want a 'Refurbishment Bridge’ finance option, which funds 6–24 months of building costs and may include the option to convert into a mortgage once work is complete and signed off.
For larger projects, a Property Development Loan may be required. These may cover 50 – 60% of the site/property value and up to 100% of the development costs, with stage payments available throughout the build. Loan terms are flexible from 1 – 12 months and arrangements with no monthly interest payments may be available.
How will you repay?
Monthly interest will be charged, but this can usually be added to the Second Charge loan, meaning there are no monthly payments to make.
Repayment can be in several ways. Once the work is complete, a property can be sold, and all lenders repaid.
Alternatively, refinance of a completed property onto a Secured Loan or Commercial Mortgage might be possible. This will mean that the debt can be financed at a substantially lower interest rate.
REAL EXAMPLES OF WHAT WE CAN DO
Help fund underpinning on a listed property in a heritage site
Find additional cash when a mill conversion was halted by structural instability from bomb damage
Arrange additional finance when a small developer needed to cap a contaminated brownfield site
Source additional funding when a conversion of a listed granary required it to be demolished and rebuilt
Find the most competitive lender when a small developer discovered dry rot in a pub to residential conversion
Why you need Rangewell to find finance for your projects
Any type of property development project, from light refurbishment projects that over-run to major new builds which have hit groundwater, can face additional costs.
If these costs can be fully identified and understood, and the initial costings for the project are sound, the chances of securing the funding required to save the project may be excellent. However, this type of emergency funding must be arranged on an individual basis.
This ‘continuation’ or emergency funding is only provided by specialist lenders.
At Rangewell, we work across the property development sector. Our team includes property development experts who can work with you to understand your needs and the potential of your project.
So if you believe you are going to run into a financial problem with your development, call us. The sooner you start talking to us to arrange the extra funding you need, the better the chances of getting your project back on track - and the less it can cost.
Helping you build your profits
Lending to suit your projectContinuation property development lending can be arranged to suit most kinds of project
Rolled up paymentsInterest can be rolled up - you may have no repayments until the project can be completed, refinanced or sold
Suitable for all types of propertyResidential, commercial and mixed-use development Conversion and refurbishment
Funding based on your projectYour project, experience and progress will all be taken into consideration by the lender
Expert supportArranging funding will require reports from valuers and specialists such as structural engineers. This works in your favour - you can have a clear view of the costs involved.
SecurityYou may be able to use additional property you already own as security
Download Rangewell’s free and detailed guide to Property Development Finance
Is there a difference between development finance and property finance?
What is classed as short term business finance?
Can commercial mortgages be used for development projects?
Do finance providers need to be authorised and regulated by the financial conduct authority?
What is classed as commercial property?
Can property development finance be used for build projects or land purchase?
Why your home may be repossessed if you do not keep up with repayments
Are bridging loans a form of commercial finance?
Does property finance cover building costs?
What finance options do property developers have?
What funding options are available for business owners looking to buy their workspace?
Do you need planning permission on land already?
What is the difference between property development finance and bridging finance?
Do I need a registered office/office registered in england?
Are Development Loans more appropriate for experienced developers with a large property portfolio?
How do online lenders compare to high street banks for interest rates?
Do Property Development Finance providers have to be regulated by the Prudential Regulation Authority?
Experience is essentialYou need to demonstrate experience in undertaking developments of the type and size that are seeking funding for.
You must demonstrate profitabilityAs a minimum guide, projects should show at least 25% profit on costs before they can be considered for funding.
Staged drawdown of fundsYou will have to demonstrate progress on the project to access each stage of funding. This can cause problems if a project faces unexpected snags.
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