Browse the topics below to find answers to our most commonly asked questions  

The application process through Brickflow is quicker and easier than traditional channels, but the process takes the same format:

• Select your lender and complete a Smart Development Appraisal (one application created through Brickflow can be used for every lender
• The lender presents the case to their credit committee and the case is approved subject to valuation, IMS and legal work (if it’s declined the process ends there with that lender)
• The lender will provide quotes for their professionals - most lenders will give you a choice of which professionals you use
• The valuer and IMS will need to visit the site (it’s strongly recommended that you attend these site visits - find out why here.)
• We advise you to wait for the reports before instructing the lender's solicitor. You’ll start incurring costs on the legal work immediately, and there may be issues with the valuation or IMS report that cause the lender to change their terms. Borrowers that are short on time may feel it is an acceptable risk and instruct the lender’s lawyers at the same time.
• The valuer will normally give themselves up to 10 working days to provide their report. The IMS report will normally take a little longer but the report is reliant on how quickly supporting information and documents are provided to the IMS.

Outside of Brickflow the development finance process is manual and slow. It will normally take a few days for most lenders to quote, perhaps up to one week depending on how busy they are. On Brickflow, we invite up to 3 lenders to bid on each project, and bids typically come back in as little as 2 hours. It can take up to 48 hours to receive all quotes.

Every lender has a different credit approval process, which can also differ according to the loan size. Smaller loans are normally approved in 2-4 business days, whereas larger loans can take up to 10 business days. Some lenders class larger loans as above £5m, others at £20m+. Of course, there are always exceptions. The record for the quickest credit approval from one of our lenders is currently 4.5 hours.

There are many external factors that will impact how long it takes to complete a loan; mainly planning conditions. If you have a site with detailed planning consent and are ready to go, it is possible to complete a development loan in around 4 weeks. Brickflow is designed not only to deliver the best value with your lending, but also speed.

A more typical timeframe for most borrowers is 8-10 weeks, but if you need to go quicker then it’s doable. The most common reasons we see causing delays are the borrower not providing the IMS with their requirements on time, or the borrower's solicitor not being prepared for the lender's solicitor.

For legal work you will need separate representation. Occasionally a lender may consider using a different partner in the same firm but this is rare. Similarly, for the IMS, it’s unusual for the lender and borrower to use the same firm but it happens on rare occasions. Separate representation ensures there is no conflict of interest.

Every lender will expect some level of Personal Guarantee. Personal Guarantees are conceptual security and are enforced if a loan goes wrong, i.e. if the scheme can't be finished with the available loan, or is sold for less than the amount owing. Alternatives are providing a Corporate Guarantee, providing a cash deposit, offering a charge over another property, or reducing leverage to less than 50% LTGDV.

Once you’ve selected your winning bid, the lender will be notified and a formal application for credit approval will be made. For the majority of lenders the information collected in your Smart Development Appraisal™ will be sufficient to obtain credit approval.

Our Smart Development Appraisal™ has been deliberately designed so that loan bids rarely change between Deal Forum and credit approval. If the lender does require more information it will be requested through the Brickflow platform.

Most lenders will need a declaration signed by the borrower to allow them to perform credit searches and complete further due diligence. Again, this will be provided to you through the platform.

Development lenders tend to be more relaxed about credit than residential mortgage lenders. As long as the issue has a good explanation, most lenders will take a view if they like everything else about the project. The main thing is to be honest and upfront and declare any credit issues. They will find out in the due diligence process, and if they find out at a later date, they are likely to increase their rate and/or fees or decline the loan. If they know upfront they will generally be more sympathetic.

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There are numerous lenders that will consider lending to first time developers on the platform. Click ‘Check Eligibility’ on each loan option for further guidance. The lender will normally expect an experienced professional team around you.

As a general rule, it is easier to borrow as a first-time developer against conversions and permitted development schemes than against ground-up developments, however we have funded new-build for first time developers. Speak to the Brickflow team to understand what your options might be.

An application for a development loan becomes regulated if 40% or more of the property will be used as a primary residence. Regulated development finance is therefore normally used when a developer purchases a plot of land to build a new home, or when they receive planning to build an additional property in the grounds of an existing primary home.

The cheapest way to raise capital for property development is to take out a development finance loan. Debt will almost always be cheaper than equity, so most developers tend to take the largest loan possible (without the benefit of the extra borrowing being outweighed by higher lending costs). The other way to raise capital is through investors, who are usually people the developer knows or contacts within their network. There are also crowdfunding platforms that offer this service. 

Yes, but we don’t currently offer 100% loans via Brickflow. Normally, a lender will acquire the site themselves, take a development loan and then top up the shortfall to 100% with their own funds. The developer has no ownership rights and becomes a 3rd party contractor. If something goes wrong the lender/owner has full control.

At the end, all of the funding costs will be deducted and the lender will normally have a fixed priority return profit share. This means that they will always receive their profit share first. If the GDV falls during the project or if build costs have increased, this reduces the developer's profit share.

It will almost always be better to raise a small deposit yourself, from your own means or your network and then raise a senior and mezzanine development loan. We’ve had recent examples where we’ve got to 95% loan to cost, and all of the profit goes to the developer, meaning there’s less risk of the developer walking away with nothing.

This will depend on the planning status. If you are buying a plot of land with no planning, the lender will look at the likelihood of planning. If you’ve commissioned a report from a well-recognised planning consultant and they are satisfied that planning is achievable, there are lenders that will entertain this. Similarly, if the land is part of an area that has been re-zoned for housing by the local authority. Lenders that take this on may want a profit share for taking the increased risk.

One step on from this, is land with outline planning permission. This is easier to borrow on, although lender appetite will be driven in part by the outstanding reserve matters. Development lenders will normally advance a land loan of between 60% and 70% (gross - interest is rolled up), on the basis that they can convert to a traditional development loan when full planning is granted.

Like any financial product, development finance interest rates are dictated by risk (or implied risk). Risk and leverage are inextricably linked, so the lower the leverage the lower the risk for the lender, which may help secure a lower interest rate.

Bank rates are generally cheaper, because they have access to cheaper capital. On the other hand, they have higher Capital Adequacy ratios which counter that, so there is an inflection point above which they are on a par with specialist funds (funds do not have to adhere to the same rules as the banks).

The banks therefore lend at lower leverage and rates, but at higher leverage there is little difference in pricing, and overall the specialist funds will normally go higher than banks on leverage. For most developers, the day 1 loan (minimising equity) is the most important part, so this is where specialist funds tend to be better for developers. Brickflow searches over 40 lenders, enabling you to compare banks, funds and many others in minutes.

This isn’t always the case, but generally smaller loans (sub £1.5m or certainly sub £1m) are more expensive. The main reason for this is the cost and resource required to underwrite and then manage a development loan is greater than a ‘normal’ mortgage. However, the costs do not rise in line with loan size.

For instance, a £10m loan does not take 10 x the work of a £1m loan. Therefore, for lenders, there are economies of scale with bigger loans, which is why larger loans will normally be cheaper. Every lender has a different way of calculating and pricing development loans, which is why it’s so important to shop around for your funding.

Development loans are normally split into 3 parts; lender interest and fees, build loan and land loan. The first part of the loan drawn is normally the land loan. This is typically known as the 'day 1 loan amount'. Depending on the other costs, sometimes there is no land loan, or sometimes a borrower does not need a land loan.

From the remaining loan, the lenders projected interest and fees for the whole loan are deducted. The remainder is the build loan. The build loan is released in pre-agreed stages based around the progress of the build. The lender will instruct their IMS to monitor each stage of work in terms of quality and against the agreed build schedule. Once the work has been signed-off, the next tranche of finance will be released to the borrower so they can pay their contractors

Poor workmanship or timing delays can lead to delayed stage payments. This can then have a detrimental knock-on effect on the rest of the project, so it’s to everyone’s advantage to ensure the build runs smoothly, and finance is released on time.

In property development finance, a tranche is a portion of an agreed loan. Loan tranches are drawn down in stages throughout the development as building work is completed and costs are accrued.

The total incorporates all of the projected build costs and professional fees. The number of tranches and how they are divided is agreed between the borrower and the lenders IMS. Tranches can be drawn on a monthly basis, although most borrowers will draw their loan tranches less frequently.

Yes. At the moment Brickflow does not compare term loans, but we can source them offline and by the end of 2022, you will be able to source term loans on the Brickflow platform.

When funds are tight, developers might request to defer some of the monies due for the land purchase until they have built the project, and pay out of profits. Not all vendors will agree to this structure, and you may find you have to offer a slightly higher price to get them to accept, but the upside for the borrower is putting less money in upfront.

Lenders still have the same value of land to secure their loan against, so they are happy. The lender will still always want some money in from the borrower (typically circa 10% of all costs), so it's not possible to fund 100% of costs. Normally, buyers will offer the seller a second charge on the land to help reduce their risk.

Worked example;

• Land for sale at £ 1m
• Buyer offers £ 1.05m with £800k payable now and £ 250k on sale of the finished site
• Lender might lend £ 600k (this is 60% of the £1m value, so well within most lenders tolerances)
• Lender also funds 100% of build costs and loan interest

The borrower puts in £ 200k+ land costs now, which for most is better than funding £400k + costs

Profit on cost is the profit generated from a project expressed as a percentage of the costs.

It is calculated as follows;

• (GDV - costs) / total costs
  • If the costs of a site were £800k and the sale price was £1m, then the profit is £ 200k.
  • £ 200k / £ 800k is 25% profit on cost.

All costs need to be deducted; build costs, lender costs, purchase costs and sale costs. The higher the potential margin, the lower the risk for a borrower. Profits can be eroded by increased costs and/or decreased GDV.

Profit on GDV is the profit generated from a project expressed as a percentage of the GDV.

It is calculated as follows;

• (GDV - costs) / GDV
  • If the costs of a site were £800k and the sale price was £1m, then the profit is £ 200k.
  • £ 200k / £ 1m is 20% profit on GDV.

All costs need to be deducted; build costs, lender costs, build costs, purchase costs and sale costs.

The higher the potential margin, the lower the risk for a borrower. Profits can be eroded by increased costs and/or decreased GDV.

Lenders will look at this metric to ensure there is enough profitability in the project - the general rule is circa 20%, but lenders might accept lower percentages for more expensive areas such as London. Conversely, lenders may want a higher percentage than 20% for more regional projects.

Return on Capital Employed (ROCE) = Profit/Capital Employed (or total equity input).

• (GDV-costs)/Capital Employed x 100
  • If your GDV is £ 2m and your total costs are £ 1.6m then your profit is £ 400k.
  • £ 400k / £ 200k x 100 = 200%
• As a developer, a good ROCE is anything over 50%. Brickflow's software is designed to find the lender with the smallest deposit at the best price, meaning most borrowers exceed a ROCE of 100%

• Work out the ROCE as above, so in this example 200%. You then divide this by the number of months of the project. Let's say it is 18 months.
  • 200% / 18 = 11.11%
• You then multiply that number by 12 to get the annualised return.
  • 11.11% x 12 = 133.33%

An exit fee is the charge applied by a lender at the point of loan redemption. It should be charged as a percentage of the Gross Loan, so it’s important to ensure your lender does not try to levy it against GDV. An exit fee can be due at any time, regardless of when the loan is repaid, making it different to an early repayment charge on say a residential or commercial mortgage. The exit fee is part of the overall income a lender receives on a transaction (together with interest and the arrangement fee).

The exit fee will be charged on the gross loan amount agreed at the outset. If you borrow less then the amount charged for the exit fee will not change.

Liquidated & Ascertained Damages. In property development this is an agreed rate of damages paid by a contractor to a developer for a specified breach in contract. This is normally a delay in completion of work against the build schedule, and is usually an agreed daily or weekly rate.

Borrowers should always take advice on this point from a qualified individual. Each property developer’s circumstances are different, so they need to seek advice that takes their individual situation into account.

However, the overwhelming majority of property developers will set up a new company for each project. Sometimes these individual land owning companies will sit under a parent company or hold company, which will be the development company.

This makes it cleaner for lenders, as they don't have to worry about unsatisfied creditors from previous projects. It also means the borrower can shop around for finance.

If you have several pieces of land in one company then borrowing from different lenders is very difficult, as each lender will want a first charge on the land, as well as a debenture over the company. If the first lender refuses to waive their debenture to other lenders, this means the borrower can only borrow from the incumbent lender. As we see on almost every Brickflow search, the chances of the same lender being the best solution on every project are almost zero. Therefore, using one company for all projects will put you at a significant disadvantage.

Another issue with using the same lender and company for every project, is strengthening the lender’s position. The lender controls all assets in the company, so if one of your projects starts to go wrong the lender can stop funding all projects simultaneously. When the sites sit with different lenders in different companies, the site that goes wrong sits in isolation

A joint venture is a collaboration between two parties for a specific project. They join forces to ensure they have the combined skills and experience needed to secure development finance. A profit share is normally agreed, based on the input of each party in terms of equity and works involved.

Here’s an example:

A developer may join forces with a land-owner. The land-owner may have no development or construction experience, and agree to put the land into the transaction as their contribution to the project. The developer would then manage the planning and construction stages.

With joint ventures, it’s essential to understand and agree Personal Guarantees early on.

Yes. Brickflow can source loans against all commercial property types that are in need of development work (new-build, conversion, permitted development or refurb). Typically lenders will want the property pre-let or pre-sold prior to loan drawdown.

If you're looking to apply for a Commercial Development Loan, click here.

Property finance that is loaned for the development of a commercial property. This includes offices, warehouses, logistics space, student accommodation, retail space, medical facilities and hotels. Most lenders will require a pre-let or pre-sale of the end property(ies) before they will be able to make a loan.

Read more about commercial development finance here. 

It depends on the nature of the project. The harder the scheme would be to sell to the general public as residential space, the harder it will be to finance, as reduced demand for a product equals increased risk for a lender. The exception to this would be a seasoned operator with an extensive track record of delivering similar schemes.

As one example, a project for adults with learning disabilities where property modifications are minor would be easier to fund with most lenders, than say a project where residents need full time care and wheelchair access and modifications are extensive. We’ve funded the development of 14 units on this basis. The development is under C3 usage and the lease is in place with the operator prior to drawdown.

As a general rule, banks are more cautious and several have declined to bid on previous Supported Living schemes posted on the Brickflow platform. Specialist development funds/non-bank lenders tend to be far more accommodating.

It’s difficult to lend to a charity because of the lack of guarantee available. Lenders ask for guarantees to cover the potential overrun of build costs as well as delays and the end value decreasing.

There are ways to mitigate this:

• Borrow less, so instead of 65% of the GDV, maybe 50%
• Put cash on account - approx 10% of the build costs
• Tie in the contractor on a performance incentive (there are multiple ways of structuring this)
• Bring in someone else that can provide the Personal Guarantee

The above isn't extensive and the options aren't mutually exclusive, so you could combine two or more of the above. We currently have 36 lenders on Brickflow, and we’re the only platform that would allow you to publish the deal and ask lenders to bid with the full knowledge that you are a charity.

Yes. If a site has outline planning permission we normally see borrowers achieving loans of 65% to 75% of the value of a site with outline planning. This is the gross loan amount, so the lender's interest and fees will be deducted, leaving a net loan amount of around 60% to 70% (depending on loan term). An interest rate of around 9% for this type of loan is typical.

It usually takes up to 6 months to deal with the reserved matters that will allow the detailed planning consent to be granted, but it can take longer. Therefore, a 9 to 12 month loan term will normally suffice, but there are no penalties for early repayment if you do achieve detailed planning earlier than expected.

Once the detailed planning is approved then conversion to a development loan should be straightforward. Any bridging lender will need to know what land loan is possible on the development finance before they can quote, so you'll need to know your development finance options first.

You should therefore create a search on Brickflow on the basis that detailed planning has been granted (use the expected build costs and GDV), save the search and we’ll call you, or contacts us on 020 4525 6764/info@brickflow.com so we can provide you with the bridging options.

Not online via the Brickflow platform at the moment, however we can provide these loans for you offline. All loans on Brickflow assume you will have detailed planning permission at completion of the loan. If you have no planning or outline planning permission we can still help. We've completed multiple loans for borrowers with only outline planning and some with no planning. Once a site has detailed planning we can then convert to a development loan.

For loan options with no planning, please call us on 020 4525 6764 or email us at info@brickflow.com

Bank rates are generally cheaper because they have access to cheaper capital.
They also however have higher Capital Adequacy Ratios which counter that, so there is an inflection point above which they are on a par with specialist funds (funds do not have to adhere to the same rules as the banks).

Therefore, you get to a position where the banks will lend at lower leverage and rates, but at higher leverage there is normally no difference in pricing, and overall the specialist funds will usually go higher than banks on leverage.

For most developers the day 1 loan (minimising equity) is the most important part, so that is where specialist funds tend to be better for developers (service can sometimes be quicker with funds as well as they tend to be smaller and more nimble).