For banks or institutional lenders to be interested in land development lending for either a new subdivision or completion of site work prior to building construction, there needs to considerable cash invested in the deal by the owner and/or developer, and there needs to be a strong exit strategy supported by binding pre sale agreements.
In many cases, there are good development projects out there that, for one or more reasons, cannot quite meet the requirements of an institutional lender.
When this occurs, private mortgage lending can be the next best option to consider.
One of the reasons that private lending can even be preferred is that this tends to be a more specialized form of lending in the first place, so the private lenders that would be interested or prepared to fund a land development financing deal are going to be comfortable with both the project and the market and regulatory dynamics that still need to be dealt with by the project owners.
With bank or institutional financing, even if funding can be arranged, the requirements for capital advance may be difficult to adhere to resulting in the project being no better off if capital can’t be deployed or advanced on a timely basis.
When there is considerable equity confirmed by market value appraisal in a project that has completed a number of regulatory and development milestones, there is a good chance that private money could be interested in funding the project.
The key is going to be in the overall business model for the project which will include the structure and strength of the exit plan.
Well thought out developments in good market areas will tend to attract different forms of money with private funding being one of the primary sources.
Ontario land development financing from a private lender is going to cost more than a conventional lender, but if you compare the incremental cost to being delayed in moving forward, or not finding funding at all, the difference can be negligible in the big picture.
If you require a land development loan for a project you are planning or are in the middle of, I suggest that you give me a call so we can go over your requirements and discuss Ontario land development financing options available to you.