Lenders currently providing funds into the development finance sector for land purchase, new build, conversions and refurbishment tend to fall within three tiers:
Tier 1: Institutional Lenders
This tier would include the High Street banks, and therefore may be the cheapest tier but the least “aggressive” in terms of loan to cost and indeed general appetite. Some banks will only consider schemes from existing clients, or via established brokers with a requirement for pre-sales or pre-lets. Generally only for established property development companies, in good financial standing and with no adverse credit.
Tier 2: Merchant/Investment/Challenger Banks
These may be specialist banks who generally like well-established property development companies/clients, but can be flexible for the right project. Recently this tier has grown with Peer2Peer/Crowd Funders expanding their offering into this space. They tend to be more generous than tier one with regard to the loan to cost/GDV percentage available to borrow. However their interest rates will reflect this.
Tier 3: Specialist Lenders
This tier includes a number of independent financial organisations and further Crowd /Peer2Peer funders. They will accommodate the developers who fall short of ticking all the above tiers’ boxes and are more sympathetic to speculative builds (within certain parameters). Again, they may be more flexible in the loan percentages they offer than the other two tiers and will support first time developers and smaller loan requests. In addition to this, some adverse credit may be considered. Again their interest rates tend to be higher than the other tiers' to reflect this additional risk.
The PANOPTIC Platform has been designed to mirror the above market place with a number of lenders selected from each tier.
If no match is found the platform can refer you to a whole of market development finance brokers, who may be able to help, if you require this service.