A guide to securing finance for your ground-up build
A ground-up build is the process of constructing an entirely new building on a site that has never been developed. Think of it like starting from scratch. It creates a wide range of possibilities.
Before you can construct buildings that meet your vision, though, you must understand the ins and outs of financing – such work requires funding, after all.
It’s quite a complicated business, which is why seeking the help of specialist finance providers can simplify the journey, if you are not using cash of your own.
If you want to learn more about securing finance for your ground-up build, here are some steps to take.
Table of Contents
Understand the costs involved
First, get to grips with the typical costs involved in a ground-up build, which includes the following.
Land: This refers to the cost of acquiring the actual land you will build on.
Materials: Lots of materials are involved in constructing new buildings, including concrete, bricks, timber, and roof tiles.
Labour: The labour part of the budget involves the cost of expenses associated with the workforce, such as the builders.
Planning permission: The cost of planning permission varies significantly depending on where you are building.
Contingency: Contingency costs are an important part of the budget. They cover any unforeseen expenses. Think of it like an emergency fund.
Accurate budgeting is essential before seeking finance, as that way, you will know exactly what you need to borrow for the ground-up build project.
Finance options available
There are two key types of finance suitable for developing property:
Bridging loans: If you don’t need to build from the ground-up and are instead renovating an existing property, short term finance by way of a bridging loan is suitable. You can pay interest monthly or at the end of the term.
Development finance: Development finance is a specialised type of short-term (and sometimes medium-term) loan that funds property development projects, from land acquisition to construction costs. It is typically used by property developers and can be used for ground-up development finance.
When choosing a finance plan, it is important to match the type of loan you need to the the project you are taking on and the cash flow needs you have.
Development finance is specifically for constructing a buiding, where bridging finance can cover a range of renovations from light to heavy refurbishments.
Key eligibility criteria
You need to know if you are eligible for financing if you need it. When choosing a lender, there are certain considerations to take into account, such as your credit history (a higher credit score means more options are available) and the exact exit strategy that is detailed.
Seeking planning permission early on and having a strong, solid business plan will help you smooth the path to securing finance for their ground build-up projects.
If you are unsure about your eligibility, seeking the help of a mortgage broker like Commercial Trust proves endlessly useful.
Tips for a smooth application process and why you should use a specialist broker
Using a specialist broker means gaining access to experts who understand the development finance landscape.
Brokers provide specific, tailored advice to developers, and they offer access to a panel of specialist lenders. They understand the complexities and nuances of ground-up development finance, so you are more likely to receive financing that suits your needs.
One crucial tip is to prepare documentation in advance. This includes any planning approval documents, the building schedule, and your own personal CV of your previous developer experience. Doing so creates a speedier application process.
In summary
Before you can start a ground build-up project, you will need to secure development finance if you can’t or don’t want to fund the project in full yourself.
It requires diligent planning. Choosing the right finance can turn your ground-up build vision into a reality. Seeking professional advice here makes a huge difference, as it means receiving tailored financial planning and access to the best lenders.
