Property Development Finance

Property development finance

property development finance

In these challenging economic times, with a tightening housing market, combined with rising input costs, the majority of lenders are showing distinct signs of nervousness in terms of the project type, loan to cost and level of experience required to get a facility approved. There are however still reliable lenders out there willing to back the right property development project.

So, what difference can you make to the outcome?

The first job is to prepare a comprehensive property development appraisal, which helps communicate to a lender the relative financial merits of the deal; that you will make an acceptable level of profit, and they will (comfortably) be repaid.

You should also present with the Development Appraisal all supporting papers which have been prepared in conjunction, including (as required) CV’s, statement of assets & liabilities, synopsis of experience etc.

..you only get one chance to make a first impression – your development proposal is that first impression…

How are the property development products structured?

property finance

Typically, property development loans are available over a twelve to eighteen month period in order to fund the land/building acquisition and the development costs.

The development loan is split into two parts;

Land Loan: Typically 65% to 75% of existing land value, with the loan outstanding for the entire term of the development.

Development Loan: Typically 65% to 75% of build costs – hard and soft costs i.e. pure construction costs together with professional fees, drawings etc. Draw down of this funding will be in tranches, and invariably against Architects certificates.

Is 100% funding available?

Given the current market conditions, pure 100% funding is extremely difficult to obtain. BUT for experienced property developers, and for the right project, such levels of funding are still possible – either through a single lender, or by arranging mezzanine finance through one provider and the senior debt through a traditional lender. These arrangements involve equity / profit sharing with the lender who is effectively an ‘investor’ in the project and will work very closely with you.

100% funding, or at least higher loan to values than traditionally available may also be achieved by providing additional supporting security, without sacrificing ‘equity’.

Development funding is the most interesting area of finance and there are experienceed investors still using this type of finance to make excellent returns, even despite the uncertainty of Brexit and large businesses.

The UK will always be seen as the front runner of commercial development and the way these schemes are funded. Remember the more detail and evidence you can provide the better your chances of securing the right deal.

Buying Property Abroad – Portugal

Buying Property Abroad - Portugal

Portugal has long been a popular choice for people buying property abroad, particularly from the colder climates of Northern Europe, looking to purchase a holiday home or a retirement home.

Traditionally they have done so using offshore companies, mainly to avoid estate taxes. Unfortunately Portugal, along with some other countries, has made this route considerably less attractive by the imposition of swingeing tax penalties on offshore companies. The magnitude of these penalties can be seen from the examples below,

Real Estate Transfer Tax

This tax is paid by the purchaser, at progressive rates of up to 6% (5% for rural property) on property used exclusively for residential purposes, on the higher of the registered value or the purchase price agreed between the parties. This is usually the purchase price.

For offshore companies this rate has been increased to 15%.

Municipal Property Tax

This is a tax, at a rate set annually, levied by the local authority and based on the registered value. The rates are different for urban and rural properties and the total is typically about 1.6%.

For offshore companies the rate has been increased to 5%

Tax on a Deemed Rental Income

Where a property is owned by an offshore company, it is treated as having produced a rental income, which is charged to income tax, of one-fifteenth of the registered value.

There are other taxes, which have to be taken into account and these are,

Income tax

Where a property is rented out, the rent is charged to income tax and on a sale 50% of the chargeable capital gain is subject to Portuguese income tax.

Stamp duty

There is a stamp duty of 0.8% on the transfer of real estate.

Donations tax

Gifts to a spouse, antecedent or descendant are tax- free but other donations attract a tax of 10%

A Solution

Fortunately there are territories, which are not on the Portuguese black list and by purchasing a property in Portugal through a properly structured corporate vehicle incorporated in one of these locations, it is possible to avoid the penalties on offshore companies. These arrangements may bring with them other benefits such as,

•The ability to sell the property in the future without the buyer having to pay Real Estate Transfer tax,
•Avoidance of Portuguese capital gains tax on re-sale,
•Avoidance of donations tax or inheritance tax
•Avoidance of the deemed benefit provisions in U.K. law.

As taxes and the manner in which they are applied change frequently specialist advice should always be taken before entering into any arrangements.

Buy to Let

Buy to let

Buy to Let

As buy to let mortgages tend to be more expensive than normal domestic mortgages, it is even more important to get the right deal, the cheapest rates and the most flexible product. As UK National  mortgage brokers, they have access to the whole mortgage market and as a consequence they can get the best mortgage deals.

Buy to Let mortgage rates are generally not quite as competitive as other mortgages, costing you a little extra in interest each year. For this reason alone, it pays to seek advice from a qualified mortgage advisor. Lenders see mortgages as more risky than other types because you must rely on tenants to pay their rent. As specialist mortgage brokers who have access to the whole UK mortgage market they can arrange the best  mortgages.

Interest Only? No Problem!
With many mortgage lenders in the UK offering buy to let mortgage products, it’s extremely important for property investors to shop around. As  mortgage advisors we have access to the whole market and will ensure you’re not missing out on the best buy to let mortgage deals.

Buy to Let Portfolio, Partnerships, Limited Company, Property Developer, Property Development projects are all possible. The booming market has been encouraged by a growing number of lenders offering specially tailored and ever more competitive buy 2 let mortgage deals. New to Buy to Let Mortgages? We believe in looking after the acorn.

As well as providing Mortgages and Commercial mortgages, our referred brokers also specialise in providing development finance for both residential and commercial property developments. They deal with clients across the spectrum from multi million pound commercial developments to smaller residential developments costing tens of thousands of pounds. Whatever your needs, they will try to help.

Bridging Loans

Bridging Loans

Fast bridging finance.  Are you a home mover caught in the gap between selling one home and buying another? It can be a tricky situation but we can introduce you to brokers to arrange a bridging loan as a cost-effective way to tide you over.

Your options include:

• An Open Bridging loan that helps you to buy a home before completing on your sale

• A Closed Bridging loan that helps if you’ve exchanged contracts on both homes, but there’s a delay in moving

Bridging finance can be arranged for a maximum of 75% LTV if you are a house mover and have a new mortgage need.

Interest rates vary from lender to lender but generally they can start from as low as 0.75% per month depending on your needs and circumstances. So if you are looking to arrange a bridging loan for mortgaging your present and future home or if you are looking for commercial fast bridging loans.

Fast bridging loans are generally secured on a property or other assets of high value – meaning that the value of your asset is used to guarantee your loan. Payments are interest only, so your monthly repayments are lower as you are not paying back any of the bridging loan principal.

As bridging loans are short-term loans, the interest rate will tend to be higher than that of, say, a mortgage, making bridging loans unsuitable for long term financing, but highly useful and profitable for when you need funds fast.

How long does a bridging loan take?
You should expect the entire process to take 5 to 10 days – i.e from your first application to the money being paid over to you. It could be done quicker but it depends on how fast you want to move and if there aren’t any significant hiccups.

• Fast bridging loans requirements.
• Completion possible within 5 days.
• Fast efficient professional service.
• Funds available for any purpose.

Commercial and Residential Property Purchase
Short term bridging loans provide assistance in cases of a temporary cash shortfall or in a crisis, during the purchase of property, land and/or business. This normally occurs when a buying chain is broken or where the purchaser needs to complete before the sale. Bridging loans can be provided for:-

• Renovations
• New Build
• Refurbishment
• Commercial Property Purchase
• Land Purchase
• Speculative Properties
• Conversions

Property Developer and looking for fast bridging loans?

Fast bridging loans can be used effectively for the property speculator to buy that property in an auction, once the property has been improved, sell and repay the bridging loan from the sale proceeds.

• Loans from 30,000 to 3million pounds
• Loans are interest only
• Secured on freehold property
• Interest rates vary from 0.75% to 3% per month
• No fees before completion and/or draw down of the loan

Adverse Credit History Loans
As bridging loans are secured on property, they can be effectively used to raise capital for any purpose, regardless of your credit history. We can assist with a IVA, BANKRUPTS, CCJS, ARREARS, DEFAULTS, MISSED MORTGAGE PAYMENTS.

 

Why you need commercial property insurance

commercial property insurance

Commercial Property Insurance.

When you purchase a commercial property, and are planning on operating a business out of it, you run various risks. In order to protect yourself from these risks, and total loss (in the event one of these risks are realize), purchasing a commercial property insurance policy is something that you should consider doing. Not only will the right policy protect your property, but also your assets, allowing you to succeed in your line of work. These are a few reasons to consider purchasing an insurance policy.

Cover your employees –
Nearly every state requires you to purchase worker’s compensation coverage, in the event your workers are injured on the job. But, even if it isn’t required, you should have a policy in place to protect yourself as the business owner. Accidents happen; if you aren’t covered, you might be sued by an employee who is injured at work. Not only does the insurance help prevent lawsuits, it also helps employees cover medical bills, and other expenses, while they can’t work, due to the work related injury.

Travel Insurance for your company

If you need to travel abroad for your business or you need to send your employees abroad to represent your company, then a group travel insurance policy will be essential. As an employer you will be held responsible if anything happens to your employees whilst carrying out business for the company. You can find out more about travel insurance at thatsinsurance

 

Liability coverage –
Lawsuits are filed on a daily basis. With an insurance policy in place you will be covered from such suits. If a client slips and falls on your property, or if other outside sources try to sue you, your policy will protect you. Paying legal fees, as well as other costs associated with a lawsuit will help you avoid the possibility of your business going under, in the event a major lawsuit is ever filed against your business.

Protect the commercial property –
Insurance will also protect the property you run your business out of. If a window breaks, or if other damage ensues, an insurance policy will cover the costs of repair. If certain natural disasters occur, the insurance policy will help cover the costs to rebuild, or help you relocate if you can’t rebuild the business. And, in dire situations, if you have to stop operations for a period of time, many insurance policies will help keep you afloat, while you can’t operate your business normally.

buildings insurance

Property protection –
In addition to covering your own commercial property, your insurance policy can also protect other property. One such example is if you have employees driving company vehicles. If they are in an accident, and damage property or someone else’s car, you are covered. If equipment you own is damaged or destroyed, an insurance policy will help replace, or cover certain costs associated with such damage.

As a business owner, there are many risks you face on a daily basis. From a lawsuit filed by a client, to property damage or loss of assets in your business space. You can’t prevent such things from happening, and there is no way for you to shield yourself from certain things from happening. But, one thing you can do is purchase an insurance policy, which will help cover costs associated to the business risks that you face, regardless of the type of industry you are in as a business owner.

If you do not know where to start looking, we recommend an independent company www.thatsinsurance.com  visit them to find out the best places to buy.

commercial property

Tips for getting your commercial mortgage approved

A guide to commercial mortgages

 

commercial mortgage

Like any other loan, applying for a comercial mortgage for your business is something most new business owners will have to do.

And, like any other loan, getting a yes is the hardest part to opening up your business. If you are weary about applying, first and foremost remember: banks need to give out loans, in order to stay in business. Apart from this, these are a few other tips to keep in mind, in order to get the yes answer you are looking for.

Be prepared –
If you walk in to the bank and ask for a £100,000 loan, but do not show them how you plan on using it, you might as well forego the application process. When applying make sure you have everything squared away. Have prospective earnings portfolios prepared, show the bank comparatives (in regards to similar businesses in your industry), show cash flow statements, showing all costs, things like taxes, insurance etc , and a repayment plan.

The more research you have done about your business, the more you have to show them (in terms of ability to repay), and the more prepared you are, the higher the likelihood of being approved.

commercial property

Anticipate questions –

You are going to hear dozens of questions thrown at you, including:

  •   How will you spend the money?
  •   How much do you expect to earn the first five years of business?
  •   How will you compete with established businesses?

These are a few of the many questions that are likely to be posed during the application process. This goes back to being prepared. If you have researched, if you know what competitors earn, if you are aware of potential losses the first year in business, and so forth, you are going to be able to answer any of these questions. Anticipating the tough questions will make the loan process easier, and will increase your chances at an approval as well.

Dress the part –
If you want to showcase yourself as a prominent new business owner, you can’t walk in the bank in a pair of jeans and a baseball cap. Dress the part, and show the lender you are serious about the loan process. Not only does this give them more confidence in you, it will also make you feel more confident when you walk in to speak to a mortgage lender. Its a business transaction, so treat it like one.

Never be negative –
Most businesses fail the first year; in fact, they tend to lose money before any profits are ever made. Present yourself as an entrepreneur, and someone who can repay the loan. Show the loan officer promo materials you have developed, an online site, and other things you have done to sell your business, before you open your doors. These ads and press releases not only show you know you will succeed, but have put money in to the business, and have a plan to repay the loan.

If you anticipate the worst, it will happen. Have a positive attitude, even if you aren’t 100% sure where things will go. Not only are you more likely to be approved, but you are also more likely to receive better terms on the loan as well.

small-business-financing-guide

Ways of getting business finance

small-business-financing-guide

Business Finance and how to get it!

The whole issue of business finance is one of the hottest topics that business owners and entrepreneurs alike face every day. Once this group of prominent persons throws a credit crunch or recession into the picture, the discussion takes unprecedented turn.

The truth is that when you come up with a business idea, the next step would be to find ways and means of sourcing finance in order to fund it. Well, you would be surprised at the number of options that are available to get your business off the ground. Without further ado, let’s have a look at some of these alternatives.

Savings

Do you have some money in your bank account? With rates of interest hitting an all time low, it’s not doing any good to you when it lays idle in the bank. Perhaps some people have made you redundant, and you have money burning a hole in your pocket. All the same, the best thing about using your savings to finance your start-up business is that you need not borrow some money from someone. In addition, you have an added advantage since you won’t be forced to start out in debt, or having to part with substantial part of equity at an early stage.

Family and friends

If you are determined to getting some business finance for your start up business, you can always count on your family or friends to provide you with all the financial support. The truth is that when you enter into a negotiation with your nearest and dearest, you are likely to get the most favorable terms. This is because they will, in many occasions; love to lend you a hand for a slice of the pie, once you are successful, rather than a donation or a straight loan.

Bank loans

Another source of business finance is through bank loans. Oftentimes, these loans are required once the business has had a proper foundation. This means that the now incorporated business may require a bank loan to meet its recurring obligations that include the daily operating capital, as well as its plans for long-term growth. All the same, in order for the business to secure this loan, the bank may request some financial information for both the entrepreneur and the business. In addition, they are likely to request collateral in order to secure and guarantee this loan.

Angel investors

Once the business has shown some growth and has shown signs of steady revenue, some angel investors may be called upon just in case the business requires more funding. This group of affluent individuals, who pool together their resources and research, provides funds for any start up business, but only in exchange for ownership or a convertible debt. Before these angel investors decide to finance your business, they will first conduct some due diligence to determine if your business meets all the requirements that form the basis of loan financing.

That said, sourcing for business finance may seem a little bit difficult, but if you develop a business plan that will prove to an investor the value that he will get by investing in your business, you will increase your chances of securing any finance you need, regardless of the stage of the business.

business finance

Business Funding

Business Finance

BUSINESS FUNDING – by Monte Zwang

Every business needs money at one time or another. The process of obtaining financing can be daunting and the chances of success limited if it is approached in a disorganized or haphazard way. Lenders are conservative critters; however it is important to understand that it is their job to lend money, and they are happy to do so if their risk is reasonable. The chances of obtaining a business loan are greatly enhanced if you adhere to the following procedure.

KNOW WHAT YOU NEED

Understand how you intend to use business financing, how much funding you need and how you intend to repay the loan. Be able to communicate this clearly and confidently with prospective lenders.

UNDERSTAND YOUR CURRENT SITUATION

If you are an existing business, are you profitable, and does your balance sheet have positive equity? What does your credit look like? Have a clear understanding of any existing liens and lien priority. Know your credit score and answers to derogatory credit issues (liens, judgments, slow pays, collection actions) before presenting your application. If there have been credit, profitability or equity issues in the past, present a credible argument as to why these issues have been resolved or how this loan will change this situation.

KNOW YOUR OPTIONS

All lending is critiqued from a risk standpoint. Certain levels of risk will qualify for certain types of financing. The level of risk is reflected in the cost of the financing. The more secure a lender’s money is, the less it costs you. Get creative. Financing takes many forms, and is available from a wide range of sources.

business finance

Standard (conventional) bank financing usually offers the best interest rates, however it is the most difficult to qualify for. These loans appear as a long-term liability on the business balance sheet. Conventional loans are available through banks and other lending institutions and can be guaranteed in whole or part by the SBA.

Revolving Lines of Credit are another form of business financing. This type of loan is secured by accounts receivable or inventory and is available from a bank or an Asset Based Lender. Credit cards are a form of revolving line of credit. An Asset-Based Line of Credit (ABL) is considered alternative financing and is available to borrowers who are too highly leveraged for a bank.

Real Property, Equipment Leases and Notes are another form of business financing. In these contracts the collateral for the loan is the property or equipment itself. When there is no outstanding balance owed on the asset, the property or equipment could be used in a Sale-Leaseback transaction. Here, the asset is sold to the lender for cash, and the borrower leases the property from the lender until the loan is paid.

Landlords can be a source of financing. It is not uncommon for a landlord to contribute dollars or rent concessions to the development of a tenant’s space. For this loan, the landlord may require a Percentage of Gross Sales Clause in the lease as repayment. Extended vendor terms for purchase of product may provide short-term operating capital loans.

In the event that additional credit strength is required, loan guarantors or borrowing someone’s credit may help the borrower qualify for less expensive financing. Be flexible. Your final package may be comprised of several lending solutions

PRESENT A CLEAR AND UNDERSTANDABLE PROPOSAL

Lenders need to know who you are personally, professionally and financially. The lender needs to evaluate Income Tax returns (Corporate and Personal), financial statements (income statement and balance sheet) and a cash flow projection. The balance sheet has to look a specific way. The Current Ratio should be at least 1:1, and the Debt to Equity Ratio should be at least 4:1.

Be specific as to how the money is going to be used and how it will be paid back. Lenders want to know what is securing their debt. Lenders evaluate the quality of the collateral, and want to insure that it is adequate to secure the debt in case of default. A secondary source of repayment is required prior to granting standard financing. The personal guarantee of the borrower is often required. In some situations, a lender may seek secondary collateral. Secondary collateral is simply some other asset in which you have equity or ownership, i.e. equipment, property, inventory, notes.

Business funding is not difficult if the borrower is creative and realistic. Know how much money you need and how you are going to use it. Be prepared to defend your needs and anticipate the lender’s questions. In the event that a lender cannot grant your request, perhaps it is the way a loan is packaged. Find a lender who is willing to make recommendations that will help you find financing. A good lender will tell you quickly if they can help you or not. If an intelligent and organized package is presented, a timely response is warranted.

About the Author

Written by Monte Zwang of Steele Development Corporation, a consulting firm specializing in business development and financial strategies. You can reach Steele Development by calling 206.878.9666 or online at www.Steeledevelopment.com.

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