If you plan to purchase, develop or build a commercial property, a specialist development finance product could help you cover the costs of the project.
But what exactly is commercial property development finance, and what kinds of projects can it be used to fund?
What is Commercial Property Development Finance?
Commercial property development finance is a specialist lending facility for commercial property development and construction projects.
Open to experienced developers and construction companies, commercial property development finance is typically issued as a short-term product for repayment within 6 to 18 months.
The construction and development of various types of properties can be funded with commercial property development finance, such as:
- Retail units
- Warehouses and factories
- Hospitals and medical centers
- Care and nursing homes
- Doctors’ surgeries
- Pubs and restaurants
- Garages and workshops
In all instances, commercial property development finance is secured against the property or development the facility is used to fund.
Who Needs Commercial Property Development Finance?
Developers and construction companies generally prefer not to invest vast sums of their own money into their current projects. The more on-hand capital they have at their disposal, the more projects and initiatives they can take on at any one time.
The preferred option for most is to use specialist facilities like commercial property development finance to fund their projects. In doing so, they are able to conduct multiple major property development projects at the same time.
What Kinds of Commercial Property Development Finance Options Are Available?
New and established developers alike have a broad range of options to choose from when looking to fund major property development and construction projects.
Examples of which include the following:
Specialist commercial property development finance
This is a bespoke short-term facility for experienced developers and construction companies with an established track record in the field. Development finance loans are typically issued in a series of instalments upon completion of key project phases. For those able to qualify for specialist development finance, it can be a uniquely cost-effective facility.
A commercial mortgage works in a similar way to a conventional mortgage, though it is taken out to fund the purchase or development of a commercial property. Exceptions apply, but most commercial mortgages are issued at a higher rate of interest than a standard residential mortgage. However, a commercial mortgage brings the benefit of being able to repay the balance over an extensive period of time – typically several years or decades.
Bridging finance is similar in many ways to development finance in that it is a strictly short-term facility. A bridging loan can be organised within a matter of days, and the funds are transferred in a single lump sum – not in a series of installments. Bridging finance can also be the best and most cost-effective way to fund commercial property development projects, though it may not be available in the kinds of sums required to finance more extensive builds and developments.