What can happen if the working capital is necessary for some purpose? However, you cannot access it and have to let go of an important opportunity. The business revenue will suffer because of this.
You are managing a property construction business. Because of a shortage of funds, you cannot think of taking up a new project. Extracting money from working capital is impossible.
The previous project’s payments are crucial to managing the cost of the next project. You are waiting to receive the payment from the client who is delaying for whatever reasons. These situations are very common in the business scenario.
You cannot ignore such occurrences but can think of an alternative way to deal with them. Reaching out to development finance lenders can be one of them. Now, you might wonder if loans can promise to meet the building cost completely.
It will depend on the type of lender you have contacted. In addition, the value of the property will decide the coverage amount you can receive from the loan provider.
Getting 100% build cost is not difficult, provided you, as a business owner, fit the criteria of the lender. Dive into this blog to get an insight into the aspects that can influence the accessibility of this opportunity.
Development finance to fund a potential project
You might find property development finance is not an easy subject. It includes some factors that ensure that providing your business needed cash infusion.
If you are ambitious to understand the chances of getting full project coverage, explore the points below carefully.
Assure them about the future prospect of your business
Approaching a lender might indicate that you do not have the required capital to meet the upcoming expenses. This funding gap is a reason for risk for the loan provider.
In this situation you can manage the situation by elaborating on your business plan. It will allow the loan provider to have a glimpse of the way you have planned everything for your business.
They will get clarity on the financial potential of your business. It can assure them about getting their money back on time.
The lenient lending policies of construction finance companies are very helpful for businesses like yours. It facilitates and optimises funding for the success of the next project.
Contact as many of them as possible to amplify your chances of getting a good deal. If everything goes well with your application, getting 100% financing is possible.
Demonstrate how you are managing the business
As lenders, they will be interested to understand how you tackle all the business owners. Establish that you are aware of this development industry. Present your studies and observations before them.
Your experience with the property development project should be clear to them. The fate of your application will depend on whether you can convince the lender or not.
If you have previous and successful projects in your kitty, they are a blessing for you. Earn brownie points by showcasing them to the lenders. These projects will have weightage over other factors.
It does not matter if you do not have such completed projects by your side. The lender is ready to accept projects you have accomplished during your employment. These will also have significance in helping you get a great finance proposal.
Share documents or proofs of past successful projects. All these will set your business apart. It will strikingly improve your chances of getting approval for 100% cost coverage.
Explain why you cannot utilise working capital
Portray the financial situation of the business. Inform them that payments from previous projects are due. Most importantly, tell them why working capital cannot fulfil the requirements of this present project.
Keep your reasons simple and straightforward. Complicated answers can spoil this borrowing opportunity. Be careful while demonstrating the reasons for opting for financing over business cash reserve.
Winning the confidence of lenders is easy if you give genuine reasons. Try to focus on the reliability factor. Brief them about any past instances of borrowing.
Explain to them how you have planned for loan payments. It will be good if you can present relevant documents establishing what you are explaining to the lenders.
For example, you can tell the lender tactfully how you are utilising the working capital for a different project. This way, you can show them your business is doing well as new projects are still coming.
It also helps you in re-assuring the lender on repayment. More business means more revenue. Repaying is not going to be difficult for you.
Introduce the net asset capacity of the business. The finance provider will be happy to see your business has strong net assets. For that, you will have to show the relevant financial statement.
Illustrate how you will utilise the funds
Maybe, your venture needs money to meet the cost of some lighter refurbishment works. It mainly concerns the improvement of the aesthetics of the property.
These types of renovations do not need a huge amount of money. Your current project is about building a new kitchen on an old property. The cost will be quite less than what you might need to renovate the entire property.
Some businesses might need finance to meet heavy renovation work. It might include improving the wiring, plumbing, walls etc of a building. The cost will be more than covering a single renovation work in this case.
Getting 100% cost coverage is easy when your requirement is less. On the other hand, convincing the finance provider to get complete cost coverage is tough when the total renovation cost is huge.
These finances facilitate different provisions. They allow you to go ahead with land purchase, property development, exit finance, etc.
Obtaining the total amount, in the beginning, is not possible with funding. You will receive portions of funds depending on the progress of the development work.
The bottom line
Considering development finance when your business does not have sufficient capital is not the only case. Leverage the benefits of this funding for the betterment of the venture.
These finances can make you feel confident while taking up bigger projects.
Harry Kane is a financial writer and author who has covered wide topics related to business loans and finance for the last decade. He has been working as the Chief Contributor in finding out deals on various business finance products covered by Thebusinessfunds, a reputed business loan broker firm in the UK. The primary work of Harry is to analyse the loan requirements of various businesses according to their circumstances and affordability. He directly communicates with the loan aspirants and guides them to get the right loan matching their needs. He has a vast experience in finance writing, working with many major business firms in the UK. At Thebusinessfunds, Harry also used to write well-researched blogs covering the financial problems of business loan aspirants and providing relevant solutions. He is a postgraduate with MSc. in Banking and Finance.