Combine the affordability of a senior development loan with the flexibility of stretched mezzanine cashflow. Stretch Senior Development Finance for projects across the UK.
Stretch Senior Development Finance – The Best of Stability and Liquidity
The utility of Development Finance , as is the case with every debt product, lies in its flexibility and affordability. A regular Development Finance package, while allowing the borrower the benefit of high loan to cost ratios, exposes the lender’s capital to relatively smaller level of market risks. This inherent mitigation of risks stems from the fact that the property under development acts as the by-default security for the loan.
This, however, isn’t always enough to cover all the costs that the project brings with it. Therefore, when presented with such a scenario, the developer is forced to look elsewhere for an additional injection of funds in the form of mezzanine financing. While this works well for small and medium sized projects, bringing a new party on board halfway through the project doesn’t always go well with the original, i.e. senior, lender. To avoid such potential conflicts of agreements and ideas, many lenders offer what is called a Stretch Senior Loan or Senior Stretched Loan.
What is Stretch Senior Development Finance?
Stretch Senior Development Finance is a complex financing tool that aims to combine the features of multiple development loan variants. At its core, every stretch senior loan is a development loan based on project parameters such as LTC and GDV.
The development loan component of a stretch senior loan accounts for the majority of the funding afforded. This component is usually conservative in nature, allowing for up to 65% of LTC to be made available to the borrower. In addition, this component is hedged against the market value of the property itself, thereby securing the interests of the lender. Quite appropriately, it is referred to as the ‘senior loan’.
To build onto the features of the senior loan, the lender offers a flexible, cashflow-centric secondary round of finance. This addition to the senior loan is quite akin to a standalone mezzanine finance package.
Example
A residential property developer plans on developing an apartment of 4 self-contained luxury flats. The luxury nature of the project means that the developer needs to be fully prepared to deal with sizeable post-construction expenses.
While the property itself costs £260,000, the development costs are expected to add up to £700,000. The developer hopes to generate £1.3 million upon successful exit.
A conventional Development Finance package may serve the project well. However, involving mezzanine lenders will be imperative if the costs exceed the available funding. To avoid this, the developer chooses to get a Stretch Senior Development Finance package. This consolidated loan covers 85% of the overall projected costs, leaving the developer with enough cashflow to manage surplus expenses.
Having to deal with just one lender also simplifies the exit process.
Notable Features of Stretch Senior Development Finance
- Multiple points of servicing
- Stretch Senior Development Finance available for residential, commercial and mixed-use development projects
- High composite LTC available (up to 90%)
- Stretch Senior Development Loans starting from £200,000
- Flexible loan terms (12 to 36 months)
- Affordable interest rates
- Swift disbursement
- Lender’s expertise available
- Lender can potentially offer exit finance, as well
Find the Most Suitable Stretch Senior Development Finance for Your Project Today
A Stretch Senior Loan brings on board immense flexibility and utility that can power a nascent project right through to completion. The difficulties in securing one are, however, just as significant. For starters, very few lenders specialise in handling Stretch Senior Loans. In addition, these loans, when negotiated unfairly, can irreversibly damage the prospects of turning any profits.
But things needn’t be so difficult. Development Finance Network, a vastly experienced whole of market broker with UK-wide operations, has on board specialist lenders who can not only offer you the most competitive Stretch Senior Development Finance quotes, but also share with your team their invaluable expertise.
Give your project the best chance to succeed with our Stretch Senior Development Finance services. Contact us today to let us know of your requirements and we will get back to you promptly!