What is Joint Venture Finance?

Joint Venture Finance is a tailored financial product that allows for the comprehensive coverage of 100% of the land, fees, and build costs by the finance lender. In this arrangement, a holding company is formed, where both the finance company and you, the developer, co-own the project. The finance lender will seek interest on the loan and a percentage of the profit upon the sale of the asset(s).

What to Expect?

• Holding Company Formation: A holding company is established by the finance lender, with you named as a shareholder within the company.
• Lending Term: Typically offered between 12-36 months.
• No Early Repayment Penalties: Experience the flexibility to repay the loan without additional charges.
• Lending Rates: Rates offered in the net borrowing sum typically range from 1% to 1.5% per month, contingent on project value, risk, builder/developer experience, and fees.
• Fees and Charges: All fees, including legal fees, stamp duty, and MS/QS costs, are covered by the finance provider and added to your net loan amount.
• No Capital Risk for the Developer: Developers are not required to inject their own money into the purchase of the land or build.
• No Personal Guarantees: Typically, no personal guarantees are required by the finance lender.
• Heavy Underwriting Requirements: Due to the significant risk, thorough checks are conducted on the land and the project’s Gross Development Value (GDV). Lenders often collaborate with a select number of trusted developers for repeat business.

Other Things to Consider:

Exit Strategies:

• The only acceptable repayment strategy is through selling the properties built to pay back the finance lender.

Risks & Fees:

• Include the accrual of interest on the total finance facility in your schedule of works and costs.
• The finance lender will take 50% of the profit made from the sale of the dwellings, after costs and interest accrue on the debt.
• Consider your minimum acceptable profit margin in case of unforeseen challenges.

Other Bits:

• The finance provider will only lend on land/sites with granted planning permissions.
• Ensure confidence in completing the development and selling within the time constraints set out by the finance provider.
• Properties must be sold upon completion; retention is not allowed.

Embark on a joint venture with UK Commercial and Development Finance, where our expertise ensures a mutually beneficial partnership. We work closely with developers, offering a bespoke financial solution that aligns with your project goals and maximizes potential profits.