Joint Venture Development Finance
Find out how you can get 100% funding for a property development project.
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There are many types of development finance, and which one you choose will depend on a range of factors: how much capital you can personally contribute, the total cost of the project, project length, gross development value, and the rates you’re prepared to pay.
If you don’t currently have access to capital to put down as a deposit, you’ll need 100% project funding. Joint venture (JV) development finance is one way to get the money you need, if you’re willing to part with a share of the profits on completion.
In this guide, we’ll explain…
What is joint venture development finance?
In a nutshell it’s a way to get 100% funding for a property development project. It’s usually used for residential projects (multi-unit, new builds, or conversions) or mixed commercial and residential developments.
You won’t need to put in any capital yourself as the lender provides all the funds. They’ll cover the land purchase, material costs, and labour costs. They do this in exchange for a substantial share in the profits the project generates (usually 40-50%). The interest rates for JV development loans are also usually higher than other such loans.
You and the financer will set up a special purpose vehicle (SPV) together. Funds will be released to the SPV in instalments, aligned with specific milestones in the development timeline. When the project is complete, you’ll sell the units according to your exit strategy, repay the loan, and split the profits with the financer.
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How it helps property developers
This type of financing is ideal for property developers who have a solid business strategy but don’t personally have the capital to get it up and running. It allows you to move quickly on an opportunity without spending a lot of time on raising funds, or to start a second project while your capital is still tied up in a first one.
By offering a 100% joint venture loan, the lender is taking on all of the financial risk. If the project fails, they will be the only ones to lose money. So, naturally, they will only offer this type of funding to candidates they believe have a strong chance of success. You’ll usually need:
- A history of successful property development projects
- A strong business plan and exit strategy
- Detailed financial projections and a profitability forecast of at least 25%
- Detailed planning permission secured for the project
Beyond these basics, lenders will make their decision based on the individual merits of your case. Different lenders have different preferences regarding the size of the project, location, and property types, but there’s usually some flexibility if you have a good business plan.
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How to get JV development finance
You might think that this type of financing is incredibly difficult to secure. It’s true that it’s only available to a small minority of individuals, but if you’re an experienced developer and you get these three steps right, you have a good chance of success.
Find a JV development broker
JV development finance isn’t offered by the usual mainstream lenders, so you’ll need to find the right partner. Unless you have existing relationships with these types of investors, you’ll rely on a joint venture broker to connect you with them.
Prepare your business case
Your broker will help you to prepare your business case to ensure it’s as strong as possible. It will include:
- Your company name and number
- Your CV or biography
- Background information on other team members
- Address of the proposed site
- Schedule of accommodation
- Drawings and plans
- A copy of the planning permission documentation
- Costs and cash flow forecasts
- Schedule and timings
- Gross development value (GDV) calculations
- Supporting documentation for GDV e.g. agent appraisal
Make your application
Your broker will identify the investor that they think is the best match for your proposed project. You’ll make your application and, if successful, you’ll receive an offer of finance. How long this takes depends on the skill and effort of your broker.
Which lenders offer joint venture financing?
You won’t get this type of financing from a high street bank or mainstream lender. Usually, brokers have a network of investors with whom they’ve built up relationships over time and who they’ll introduce you to if they believe your business plan is good enough.
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Do you need a deposit?
No. With 100% JV development finance you won’t need to put down a deposit. This is ideal if your capital is already tied up in other projects that are yet to generate revenue. You’ll be able to move on to new projects faster and work with a greater maximum capacity.
Speak to a broker experienced in Joint Venture Development Finance
If you have an opportunity in mind and you’re keen to get moving, the first step is to find the right broker. This is a crucial decision that can be the difference between success and failure to secure funding.
We work with numerous brokers who are experts in joint venture development financing, so if you tell us a bit about the project you’re hoping to progress, we can match you with the person we think is best for the job. Just give us a call on 0808 189 2301 or enquire online.
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