Predevelopment Funds 101 – Everything To Know

Before a land development project can begin, multiple expenses are incurred. These expenses are referred to as soft costs. They’re the preliminary expenses that are undertaken to ensure a project is feasible and ready for construction.

These costs include running a cost-benefit analysis on the project, determining whether it’s feasible, architectural fees, engineering costs, exploratory work, permits, licenses, etc.

Obtaining financing for such expenses is tough in the best of times. Now with the economy still recovering from a crisis, it’s challenging for businesses to be approved for predevelopment bank loans.

Private lending companies are a great alternative to traditional lending. They provide funds quicker and draw up more flexible loan agreements as well.

What is a predevelopment loan?

Predevelopment financing is crucial for companies before they can begin construction. A  predevelopment loan pays off the many expenses incurred before breaking ground. As with any real estate project, it only begins generating returns once it is built and ready for tenants/owners to move in. Financing is therefore required for expenses incurred before the project is completed.

Traditional predevelopment loans are typically given for multifamily properties, supportive housing, community facilities, rental housing, nonprofits, etc. However, private lenders are more accepting of predevelopment loan applications.

Architect at work

Applying for a predevelopment bridge loan

Predevelopment loans tend to be bridge loans. They take 2 to 3 weeks to process with private lending companies like Global Capital Partners Fund. In other cases, it may take longer, depending on the kind of transaction taking place.

The first step of the application process involves due diligence. The lender reviews your loan application and obtains all important data about the project from the loan applicant. The loan agent then provides preliminary feedback about the application.

This feedback is required for the second stage of the process. The lender shares the loan structure with the applicant, the applicant then decides if they will be able to service the loan accordingly. This part of the process also enables both parties to establish mutual ground.

The third stage of the process is the final paperwork. The loan agreement is drawn out and the loan agreement is signed.

Global Capital Partners Fund is a renowned private lending company based in NYC that has been providing funds to borrowers for the past three decades. The company has funded over $2 billion in transactions.

They provide flexible terms on their loans. Get in touch with them for bridge financing in Seattle, WA, hard money loans, and much more. Call  +1-800-514-7350 to speak with their agents.

Categories: Finance

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