Compare Development Finance Brokers

What is a Development Finance Broker and What Do They Do?

A development finance broker specialises in securing short-term loans for ground-up property developments, conversions or renovations, acting as an intermediary between borrower and lender.

Typically, a development finance broker will use their industry connections and networks to source the right loan from the right lender to meet your requirements and negotiate terms with the lender on your behalf. Whether for residential development finance, commercial development finance or mixed-use, brokers should know which lender is best suited.

Applying for and securing development finance can be a long and complex process, with multiple layers of paperwork and form-filling – a broker takes on the legwork and will handle your application from start to finish. They also ensure compliance both on your part and the lenders, and maintain open communication between you, the lender and any third parties involved.

How Does a Development Finance Broker Work?

Property developers are undoubtedly skilled at scouring sites, pinpointing opportunities, and envisioning transformation, but when it comes to sourcing finance, most developers lack the necessary knowledge to find themselves the best deal. 

A property development finance broker bridges that knowledge gap.

They are in the market every day, fostering lender relationships, learning tricks to application approvals, manoeuvring around hurdles and gaining daily insights.

By contrast, most developers are in the finance market once every two years, or for those delivering multiple sites, a few times a year at most, making it impossible to keep up with the continually changing market. Especially since the market lacks transparency, lenders generally don’t publish their criteria and, until Brickflow, there were no live comparison sites.

A development finance broker brings their market knowledge, expertise and network to you as a borrower.

The process will usually go along these lines:

• Consultation: The development finance broker will discuss your project and financial requirements to understand the scope of development finance that you need.
• Loan search: Using our tech, Brickflow broker partners instantly search loans from over 50 development finance lenders from banks, challenger banks, non-banks and specialist lenders. Brokers not using Brickflow will try to do the same job manually.
• Secure the loan: Using Brickflow’s digital Smart Appraisal(™) form, your broker will help package your application, apply and negotiate with lenders on your behalf to secure the most favourable terms and rates.
• Post-loan support: Brokers may also provide ongoing support after the loan is secured, managing any challenges that may arise.

Traditionally, securing a good deal depends on the development finance broker’s network and how much time they dedicate to market research. Due to time limitations and wanting to report back to clients quickly, most brokers only inquire without around 4 or 5 lenders. Brickflow has changed that, opening the market up to everyone, and enabling our broker partners to instantly search and compare loans from over 50 lenders.

We’re happy to connect you with any of our broker partners, or you can introduce your own broker to Brickflow.

How Much Does a Development Finance Broker Cost?

In most cases, a development finance broker won’t cost you anything because broker fees tend to be paid by the lender.

The arrangement fee charged by lenders is typically split equally between broker and lender. (Normally, the arrangement fee is deducted from the loan advance, or added to the loan – if added to the loan, you will be charged interest – or paid on completion from your own funds.)

Sometimes a broker will charge a fee on top of what they receive from the arrangement fee - commitment fees to prepare the application are commonplace. Ask your intermediary about their fees at the outset. Less common is where lenders charge a a smaller arrangement fee and give no procurement fee to the broker. In this case, the broker will charge their own fees, which might typically be 1% of the loan amount. 

Benefits of Using a Development Finance Broker

From conversations with brokers, we estimate the development finance application process could take 100+ hours for a borrower to complete, including research, creating an application and then herding all of the professionals towards completion.

Then, add all the market complexities. A single project could be funded with a combination of senior debt, stretched senior, mezzanine, and/or preferred equity, meaning developers could potentially have three lenders and three sets of lawyers to deal with.

Very few, if any, property developers and investors have this kind of time or resource. 

Lacking time and knowledge, and to avoid multiple rejected applications, developers often settle for any old deal – using a development finance broker avoids this and can help you get the best deal on the market for your project.

As well as avoiding a dud deal, there are many more benefits of using a development finance broker:

• Outsourcing to a specialist: Developers always outsource, from architects to planning consultants, to get the best solutions. Likewise, outsourcing the process of securing finance to a broker is the most time and cost efficient way to get the best deal.
• Time-saving: Knowing your broker is progressing your application leaves you free to get on with other things.
• Market access: Just speaking to high street or challenger bank lenders is unlikely to yield the most suitable development finance for you. You need to consider specialist and non-bank lenders too - some of which only deal with intermediaries.
• Expertise and guidance: A development finance broker understands how best to structure debt and build the right capital stack. They offer tailored solutions, advice, and guidance and answer any queries you have throughout the process.
• Inside knowledge: Brokers understand the sources of funding that underpin a lender (e.g. private capital, bank funding, non-bank funding), so they know a lender's limitations, flexibility and completion processes.
• Negotiating power: Development finance brokers can sometimes negotiate better terms on your behalf, especially if they have a good relationship with the lender or access to exclusive rates or products. A good broker will submit far more business to a lender than any individual borrower, which increases negotiation power - with nearly 200 broker firms using Brickflow to submit business to lenders, that negotiating power is even further magnified.
• Getting it right can be career-changing: Working with a development finance broker who uses Brickflow can prevent you from settling for the lure of low interest rates attached to a meagre 60% LTC, and reveal the lenders offering up to 95% LTC. A potential 35% equity saving is career-changing for any developer because you can run much bigger, or multiple projects with the same amount of equity.

How to Find a Good Development Finance Broker

At Brickflow, our broker partners are amongst the best development finance brokers in the UK, and we can connect you with any of the intermediaries featured.

Alternatively, you can tell your own development finance broker about Brickflow, so you can benefit from our real-time development loan comparison tool and our seamless digital application process.

Other things you can look for when choosing a development finance intermediary:

• Experience and Expertise: Working with a development finance broker with experience in arranging finance for projects similar to your own will make the process more efficient and increase your chances of getting the best-fit deal, so check previous case studies.
• Research and Reviews: Look for positive client reviews and testimonials.
• Accreditation: Brokers who want to become members of accredited bodies such as FIBA (Financial Intermediary and Broker Association) or NACFB (National Association of Commercial Finance Brokers) must meet certain standards of professionalism and adhere to a strict code of conduct.
• Transparency: Brokers should be upfront about their fees and the search process they used to source your loan.
• Are they a Brickflow partner: If a broker isn’t using Brickflow, then they’re not performing a full market search and are unlikely to find the best deal that meets your needs.

What is the Best Way to Compare Development Finance?

Before every property development you need to model your deal and check if it actually stacks against real-time finance options. When you know how much you can borrow, and how much it will cost you, you can accurately calculate profit and the maximum price to pay for the land.

The best way to conduct detailed due diligence, find actual borrowing options, and secure a loan is by using Brickflow’s real-time development finance comparison tool. It takes a few seconds to enter the details of your project and instantly search for loans from 50+ development finance lenders.

Your search results will show you all the options available from banks, non-banks and specialist lenders, enabling you to compare like-for-like details on:

• Net loan: The amount of loan you will actually draw down, determined by the lender’s maximum LTC (Loan to Cost) ratio and directly impacting your deposit requirements.
• Build loan: Most lenders will cover up to 100% of your build costs.
• Land loan: Lenders will have different % loan caps against the day 1 land value. How much you borrow against the land (the land loan) is calculated by subtracting the interest costs, arrangement fees and projected professional fees, then 100% of the build costs plus build contingency, as long as the Day 1 land cap is adhered to.
• True Monthly Cost: At Brickflow, we use the metric ‘True Monthly Cost’ (TMC) as a way of fairly comparing loans and giving an overall representation of what each loan costs (rather than users being drawn to the lowest interest rate). It’s calculated as follows: 
  • (Interest Rate / 12) + (arrangement fee + exit fee) / number of months = TMC
  • E.g. (10% / 12) + (2% + 1.5%) / 18 = 1.03% per month
• Deposit: The difference between any deal and the right development finance deal can be hundreds of thousands of pounds in equity requirements, and is a key element of any development finance comparison. Inefficient equity deployment is one of the biggest drags on a property investment business.
• Profit: Profit outcomes vary dramatically with every loan, which is why it’s crucial to check your finances before committing to a site rather than relying on an estimate, and always shop around to find the best deal.
• ROCE: When comparing development finance, most astute developers and investors now consider ROCE a key indicator of a viable deal over profit. Brickflow allows you to sort your results based on your preference, such as the largest loan, highest ROCE, or lowest interest rate.

Almost all investors acquire sites they shouldn't at some point in their career. Sites that don't work financially can set you & your business plan back by years. Our software reduces that risk. Searching for finance upfront identifies the deposit needed, finance costs, ROCE and your profit, saving you wasting time and money on sites that don't work.

Savvy investors include Brickflow as part of their due diligence.

As well as comparing development finance, you can also search and compare bridging finance and commercial mortgages on Brickflow.