Construction finance can greatly vary in the needs of the clients and banks involved. But one piece of advice that will apply to all developers will be to plan your finances carefully. If you have expert advice from a broker prior to commencing construction you should have solid financial backing as well as contingency if something goes wrong. Here are out top 5 tips for smaller developers looking to gather construction finance:
1. Seek legal and financial advice
As a smaller business (or perhaps you're an individual wanting to build a home) you're going to be under the pump with your project. There is no way it is possible, or smart, to do it all on your own. You will require legal advice, and mostly likely specialist financial advice. So its important to get this before you get too far into your project so you know what constraints will be in place (imagine getting a whole design done and then realising you wont be able to finance it!)
2. Secure your funding source
Its important to be sure your investors (if you have them) are solid and they have tangible assets such a cash/property. For your own finance, you may want to conduct a financial 'health check' to see what you can and can't afford.
3. Create a Plan and Stick To It
Proper pre-construction planning is absolutely critical to every project. If you have broad scopes, schedules, specifications you're likely to easily get off track. Additionally, not having a solid budget combined with the above is a recipe for disaster. So planning out these aspects of the build is key.
4. Be Aware of Your Own Risk
Lenders nowadays are highly risk averse, which means they won't just decide to lend to you based on the security of the project, they want to know there's people behind the project with a good track record and reputation. If you're still building up that track record that's okay, but be prepared to show you're not high risk in other ways. The good thing about going through a broker here is that we know how to present you to banks/non-bank lenders, and what you'll need to get across the line.
5. Know Your Stuff
There are some basic things we'll need to kick off your loan; a description of your site, zoning, a design concept, resumes of different people involved, a feasibility study, timelines etc. The list goes on. Be organized and be peppered. Knowing your stuff will make the process less stressful, faster and more smooth for all involved.
AAA Mortgages has over 30 years experience providing expert financial advice and broking. Contact us today for advice on a construction/development loan.