Commercial Development Loan

Commercial Development Loan | Prestige Capital Partners

Commercial Development Loan

Commercial developments can cost millions to purchase or build thus potentially command huge rental incomes. Despite the upside and potential revenue which projects can generate through commercial transactions, funders most prefer to help those that have flourished or have some equity in place. This makes it rather difficult for startup development companies to get the necessary seed funding. The lender can structure a loan in stage-payments (tranches) – depending on the lender these agreements may be able to be altered when indicative terms have been issued in advance by the lender.

Development Projects

Our funders are able to structure a loan which is suited to the needs of your development project. The type of project for whom we facilitate financing include but are not limited to:

  • Industrial Projects – Waste Management Projects/Treatment Facilities/Waste-to-Energy/Alternative Energy/Bio-Fuel Projects
  • Government Projects – Infrastructure
  • Residential Projects – Housing/Student Housing /College Campus (Schooling) Projects/Hotels
  • Recreation Centers – Amusement Parks/Resorts/Casinos/Other Entertainment Spaces
  • Mixed-Use – Shopping Centers/Hospitals

Startup Development Loan

When applying for a startup development loan, you might already have a structure on the site. Lenders might put a lien on the property to secure repayment obligations. Other funding opportunities for also include a comprehensive approach providing on and off balance sheet solutions. Development loans include non-recourse and recourse financing. Just like any other real estate investment, lenders will make some considerations such as:

  • the viability of funding a development project such as it’s location and existing infrastructure
  • permits, agreements and local authority licenses – (use of greenfield/brownfield)
  • and in some circumstances they may also ask for resumes of the project principles.
  • Projects should contain long term job creation, sustainability and focus on quality of life issues for employees and surrounding neighborhoods.

In some scenarios our funders will provide an extra cushion in funding as a contingency measure as they are well aware that development projects can run over budget. Whilst most funders will fund up to what a project requires to complete the project, we do have a handful of funders who will fund over and above anticipated projected capex. Some of our funders are incredibly nimble and flexible and understand that nuances in large project finance. Quite often everything has to fit within a conventional banks rigid criteria and as such. This can imply the bank is looking for reason why they can’t finance a project. Our funders instead are looking for solutions and reasons why they can finance a development project.

Multi Family Development Loan

What qualifies as a multifamily building?

Any building consisting of four or five separate stand alone family dwellings is considered a “multi-family structure”. Development loans are available for the construction of a multi-family properties. Owners, developers or investors can also apply for finance that helps to fund “shovel ready” projects to acquisitions.  Although multi family loans can be obtained pretty easily, it has been known that some lenders  offer fixed rate loans with terms as long as ten years and LTV ratios at 80 percent.

Bridging Loans

What is a Bridge Loan?
Bridge Finance usually implies a short term mortgage loan normally underpinned by property of some kind of collateral. It is designed to be an interim loan on a short term basis until a more long term loan has been agreed. Because of this, bridge finance can be a rather expensive way to raise capital.

A “bridge loan” is a short-term mortgage used to acquire a property quickly. Quite often, bridging loans are referred to as “private money” or “hard money loans”. Generally speaking, this financing option is used until permanent financing is found. The commercial property is resold, or it is rehabilitated and then resold.

Who needs this kind of loan?
Property investors who “fix and flip” properties are the most common customers who apply for a bridge loans. The advantage of a bridge loan is:

  • It allows investor’s money to go further
  • Bridge loans may have less requirements than applying for a bank loan

Private funding is an option for megaproject entrepreneurs who need a development loan. They can differ from main stream bank loans because commercial banks have follow a set of strict underwriting guidelines.

Leveraging Your Assets

We also have an option whereby those who are sitting on substantial collateral/assets and wish to yield a return now have an opportunity to do so! The premise being that the assets  are ceded into a fund and the fund will pay out an annual return. Assets accepted into the fund range from properties valued at $10m and up, precious metals, bonds and many many more!

Loan Terms

Loan To Value (LTV)

What is loan to value?
Loan To Value is is the loan amount vs the value of the asset as a percentage. For example; an asset may be worth $100 million and the loan needed is $60 million thus the loan to value is 60%.

Loan To Cost (LTC)

Loan To Cost is a term used to describe the amount of borrowings in respect to the amount of costs associated with the construction of the property until completion. There are two inclusions in the loan:

  • Hard costs – which are costs incurred to start the developments which would almost include the land fee and construction expenses.
  • Soft costs – are charges made buy lawyers, architects and other overhead costs.

Gross Development Value can help you work out the financial viability of the proposed property development project, it is most widely used for large projects.

Please note: Our Disclaimer Applies

Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.

Commercial Development Loan was last modified: April 11th, 2017 by Denise