March 19th, 2019. Tom Rowlands
What is Developer Equity Funding and How Can it Help You?
As the age-old saying goes: two brains are better than one. And, in many, situations as are two funding streams. If you seek a high percentage of development finance and/or support and guidance, developer equity funding may be a good match.
What is Developer Equity Finance?
In its simplest form, developer equity finance is a form of debt funding top-up. Also known as joint venture (JV) financing, this service allows funds and investors to top up the deposit needed, sometimes up to 100%, so that a developer can buy and build a project with minimal cash input whilst retaining full ownership.
Usually, a service reserved for experienced developers (it’s not great to make mistakes with someone else’s money), this can provide professionals with key finance without needing to pull cash out of other projects or self-funding.
Developer equity finance can be used for both residential and commercial development projects to help increase scale or to complete multiple projects simultaneously. However, this is usually only available for new developments.
Often this works through the creation of a joint venture profit share agreement, where the investment partners require the developer to assure their return is protected or using a special purpose vehicle (SPV) which is a form of limited company which focuses on property. Regular project updates are expected, and profits are distributed to investors on completion of the property sale.
Developer equity finance typically lasts between 18 and 36 months, assuming planning permission is already in place.
How Can Equity Funding Help Your Next Project?
Developer equity finance provides a simple and straightforward way of financing a development project on a tight timescale. It provides security in a time of uncertainty and allows tender requirements to be met.
Another key benefit of developer equity finance is that existing developers who lack cash or have equity tied up in other projects can often still secure the funds required to make their development or property refurbishment a reality – typically, developers would be expected to invest at least 30%, whereas this allows 100% finance to be raised. This minimises risks for developers and, in some cases, increases return on investment.
Why Use a Broker to Find Developer Equity Funding?
When you use a broker like us, developer equity finance provides the opportunity for borrowers to build long-term relationships with brokers and lenders. Plus, as independent commercial property finance specialist, you can rest assured that you will receive a competitive deal that suits your specific needs.
Article By Tom Rowlands
March 19th, 2019
Tom joined Pure Property Finance in 2017 after a career as a Client Wealth Manager, where he spent just under 3 years advising on financial and tax planning. Tom specialises in bridging finance and property development funding, having completed deals ranging from a simple £30K property purchase through to £2m+ mixed-use developments.See more articles by Tom