As businesses grow, the entwined concepts of growth and expansion are bound to come into play. Companies certainly need ready cash to meet the challenges that these pose to their organizations.
Expanding one’s company headquarters, setting up new branches, or relocating facilities to more spacious premises are all covered by a financial instrument known as development finance.
Development finance is an umbrella term that refers to loans taken out to pay for the construction, refurbishment, or conversion of commercial or industrial buildings.
For the most part, these are short-term loans used to pay for expenses incurred throughout construction. Upon completion of the structure, the loan may be repaid by either refinancing or selling the finished building.
Can My Business Benefit From Using Development Finance?
Regardless of whether you’re a startup, a company on the verge of expansion, or an already well-established business, utilizing development finance has several benefits:
You Can Build Bigger
Availing development financing gives you the means to undertake initiatives that, under ordinary circumstances, you wouldn’t have the funds for. Building bigger also means you can grow your business faster, leading to increased profits over time.
You Can Build More
Most of the time, businesses tend to hold off on juggling more than one project at any given time because their finances might not be able to take on the strain of so much going on. Development finance changes the game in this context.
You need not wait until a current development has been sold to start something new. Instead, you can grab hold of an opportunity you can’t afford to miss or find a great deal on properties on auction.
It Frees up your Resources
Even if you did have a substantial sum with which to do as you please for your business, you want to ensure that your finances are flexible enough if a project goes south. Availing of a development finance package means you don’t have to tie up a lot of your cash on hand until such time that you can sell your project.
Development Finance Means a Bigger ROI
Believe it or not, availing of development finance loans can actually ensure that your return on investment (ROI) will be more substantial because you’re putting in less capital. While this means you’ll need to pay the cost of financing from any profits you earn, your actual ROI from whatever you’ve invested will be considerably higher.
Before you head out and start shopping for lenders who specialize in development finance, keep the following things in mind:
- Be sure to factor in all the relevant costs for whatever it is you plan to do with the money – a list that includes land costs, development expenses, professional fees, lender’s fees, and contingency;
- You may only borrow up to 70 per cent of the total cost of your site but up to 100 per cent of the cost of construction; and
- It is possible to get very substantial development finance up to 100% of the total cost of your endeavor.