Hope Capital has launched a new bridging loan for developers.
The ‘Marketing Bridge’ is designed to forward fund a developer’s proposed development providing them with a bridging loan on practical completion of their building work.
Designed especially for experienced property developers, it will enable the developer to pay off their more expensive development loan at the moment of completion whilst providing them with up to six months longer to sell the units in their development, the lender said.
Hope Capital said that often developers are forced to sell new units either off plan or with a 20% to 30% discount in order to pay off their development loan as soon as possible. If this does not happen as quickly as planned, the developer can incur punitive penalty charges.
The bridging lender argues that with its Marketing Bridge, the developer can receive a formal offer of a bridging loan of up to 75% of the completed value (GDV) of the units. The offer will be made either prior to the commencement of the development, or during the development if appropriate. It will be valid for a year so that it can be drawn down as soon as practical completion of the development has taken place.
Hope Capital claims that this will make it easier for them to raise development funding for the construction of the building as the development funder will clearly see the means of repaying their advance once the construction phase was completed.
In addition, the developer would not have to discount the sale prices of the completed units to secure quick sales post completion. It will also enable the developer to release equity tied up in their development immediately post completion, without having to wait for sales to be completed. The funds released could be used to fund further land purchases by the developer, without waiting for sales of the completed units.
Jonathan Sealey (pictured), chief executive officer of Hope Capital, said: “Our Marketing Bridge has been carefully designed to cater for the needs of experienced developers. For a long time developers have been crying out for a means to fund newly built units so that they have time to market and sell them properly at full market value. Having a bridging loan of this nature should enable them to significantly increase their profit margins whilst also paying off their original higher rate borrowings.
“Being a true principal lender has meant that we can rapidly respond to the needs of the market and come up with the short term loans that people really need.”