Joint Venture Development Finance for a 3-Unit New Build Development

The Challenge

Our client was an experienced contractor and project manager who had recently completed their first residential development using traditional senior development finance.

Following the success of that project, they identified an opportunity to purchase a larger site in the South West to build three new homes.

Although the first development had generated equity, the client wanted to retain most of the profits to support cash flow and future business growth.

A Developer Exit Loan was explored as a way of releasing capital from the completed scheme. However, it didn’t generate enough funds to provide the deposit needed for a conventional senior development loan.

There were three key challenges:

• The client had no cash deposit available.
• They were stepping up from their first development to a significantly larger scheme.
• They planned to manage the build themselves rather than appoint a main contractor, resulting in a lower construction budget than many lenders would typically expect.

These factors meant that many traditional development finance providers were unwilling to support the project.

Our Solution

Positive Commercial Finance identified that a Joint Venture Development Finance structure would provide the flexibility the client needed.

We introduced the developer to an experienced joint venture funding partner. After visiting the site and meeting the client in person, the funder’s decision-maker gained confidence in both the project and the developer’s ability to deliver it.

A deal was agreed on the day.

The joint venture partner provided 100% funding for the development costs, meaning the client did not need to contribute a cash deposit. The agreement also removed the requirement for a personal guarantee, giving the client greater financial flexibility while allowing them to retain capital for other business needs.

Deal Structure

• Development Funding: 100% of project costs
• Interest Rate: 1.66% per month
• Arrangement Fee: 1%
• Exit Fee: None
• Term: 12 months
• Profit Share: 50% Developer / 50% Joint Venture Partner

The Outcome

The client secured the funding needed to purchase the site and begin construction without investing their own capital or providing a personal guarantee.

By choosing Joint Venture Development Finance instead of a traditional development loan, they were able to take on a larger project while preserving cash flow and continuing to grow their development business.

This case study demonstrates how joint venture funding can help experienced builders and emerging developers move to larger schemes when conventional lending isn’t the right fit.