Types of Commercial Property Development Finance

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Commercial property development finance is what we use to describe any finance that is secured against a commercial property. You can use commercial property finance to purchase, build or develop your commercial property or use it for financing multiple residential properties.

Because there are many different funding platforms, it can often be confusing knowing which one best suits your needs.

Commercial mortgages
One of the most straightforward ways of buying a property that you want to use or rent out. They can be used for almost any property transaction from a ground-up building development to buying an existing company. Commercial mortgages can run for up to 40 years and will require a hefty 25% (or more) deposit to be paid. Just like a residential mortgage, it can take a while to establish an agreement with a lender and it include a lot of paperwork and credit checks before it completes.


Bridging finance
When you need to secure finance for a property bought at auction or as part of a property development project you may consider a bridging loan. Essentially it is a loan that enables you to purchase a property in order to redevelop it and either sell it on or arrange a more permanent form of finance for it. The bridging loan becomes a financial bridge of getting you from point of purchase to the point of sale (or the end of your refurbishment project). They usually run on much shorter terms than traditional loans but can be easier to arrange, leaving borrowers with a more immediate source of funding for time-specific projects.

Portfolio finance
When you want to borrow against more than one property or you have a collection of properties or investments then you may struggle to get multiple mortgages all running concurrently. Using portfolio finance can make your property holdings more efficient. It is essentially a long-term loan.

Auction finance
Most properties, even those sold at a discount price at auction, can be expensive. Purchasing often requires large deposits and payments made within 28 days. Auction finance is a useful way of securing guaranteed funding for your auction purchases and allow you the funds to renovate or refurbish the property. Auction finance is also useful if you have existing properties that your money is tied into, it allows you to either buy (refurbish) and sell within a given time period.

Mezzanine finance
Offers funding that fills the shortfall between the principal lending and the total cost of the development. In times when the economy is uncertain and lending levels are down, mezzanine finance can fill in the gap – especially when the total gross development costs aren’t supported by your principal type of finance. It is a short-term loan aimed at helping you to fund your project to completion in order to maximise your potential return. Using mezzanine finance will usually result in a second charge being made against your property.

Always explore your funding options. To find out more about your commercial development finance options, call us on 03330 069141 or request a callback.