The typical option for a bridging/development finance loan is that once the build has been completed, the property will be sold on for a profit, and the originally borrowed funds will be repaid subject to interest.
In the modern financial landscape, there are other options available:
The funds can be refinanced through an exit product. This will enable you to clear the original loan, and allow you to extend your repayment period until all the property is sold.
Long term refinancing is also an option. If you prefer to keep hold of the capital after sale of your developments, you can refinance your total borrowings to allow for a longer repayment period. An interest payment will be added to the total of your capital and interest from the original borrowings.
Mezzanine Finance works very similarly to other Development Finance options. The primary lender will fund 70% of the Gross development value, leaving 30% to be funded by the developer. 30% can still be a large amount of money, which may hinder your business progress. A mezzanine funder can step in and cover a further 20% of your total.
The typical cost for this, will work by the funder than taking a larger percentage of the profits.
For example if your total costs equal £500,000 and the mezzanine funder covers ⅕ of the cost, they may ask for ¼ of the sale cost. This gives them their incentive to invest, as well as helping you to acquire your remaining profits.
As a founder of multiple businesses, Jamie believes that mindset, discipline and ambition are key drivers for success, both for his businesses and for his clients.
Share this article
The first steps towards the funding your business deserves
Disclaimer: JD Capital Finance (Registered office -First Floor, Steeple House, Church Lane, Chelmsford, England, CM1 1NH, Registered Number 10128297) helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. JD Capital Finance can introduce applicants to a number of providers based on the applicants’ circumstances and creditworthiness. JD Capital Finance may receive a commission or finder’s fee for effecting such introductions.