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90% LTC financing: How it works and why it’s beneficial

90% LTC financing: How it works and why it’s beneficial

In the world of property development finance, loan-to-cost (LTC) is a key metric that can significantly impact your project’s viability. High LTC financing, such as 90% LTC, offers developers access to larger projects with reduced upfront capital. Let’s explore how it works and why it’s a game-changer for developers.

What is loan-to-cost (LTC) financing?

Loan-to-cost is a ratio that represents the percentage of a project’s total costs that a lender is willing to fund. These costs typically include:

  • Land acquisition
  • Construction costs
  • Professional fees
  • Contingency budgets

For example, with 90% LTC financing on a project costing £1 million, a lender would provide £900,000, leaving the developer to contribute £100,000 in equity.

How 90% LTC financing works

With high LTC financing, developers only need to contribute 10% of the project’s total costs upfront. The remaining 90% is covered by the lender, often in staged drawdowns linked to project milestones, such as completing groundwork or reaching structural completion.

Lenders such as Imperial Blue Finance are known for offering competitive LTC financing, helping developers maximise their capital efficiency and achieve their project goals.

Why 90% LTC is beneficial for developers

  1. Lower equity requirement: High LTC financing reduces the amount of upfront capital developers need to contribute, allowing them to:
    • Take on larger projects.
    • Diversify by running multiple projects simultaneously.
    • Free up cash for other business activities.
  2. Increased ROI: By investing less equity, developers can achieve higher returns on investment (ROI). For example, a smaller equity stake that generates the same profit as a larger one will deliver a better percentage return.
  3. Improved cash flow: With more of the project costs funded by the lender, developers have greater flexibility to manage their cash flow, covering operational expenses or funding unexpected costs.
  4. Access to larger projects: Developers with limited capital can access larger, more lucrative opportunities. This is particularly useful for those looking to scale their operations.

Final thoughts

90% LTC financing provides a powerful tool for developers, offering access to larger projects with minimal upfront capital. By working with the right lender and presenting a strong business case, developers can leverage this type of finance to maximise their opportunities and returns. Lenders such as Imperial Blue Finance ensure a smooth and flexible process to help bring your vision to life.