Small-Scale Property Development: Another source of funding?

Several local business owners have asked us about two comparatively new developments associated with small-scale property developments. We would like to share some information on these topics with you. We start with crowd funding.

Another source of funding?

Crowd funding can raise debt (loan) or equity (share) capital.

The majority of conversations we have had with local developers have been focussed on crowd funded equity investment as a source finance for some small-scale property developments. This appears to be a possible source of funding for you to consider for local projects.

Whilst we have no commercial connection with any business involved in crowd funding, nor are we recommending this source of funding, we are aware of this facility, and we have considered this option with some clients. We believe you should be aware of crowd funding so that you are able to decide if you wish to carry out the necessary investigation to determine whether it is appropriate for you, your business, and your proposed development. You should obtain detailed professional advice on crowd funding from an FCA regulated specialist adviser.

From a business perspective we can see several points that you should consider.

This can seem like a curious way to raise finance. The developer advertises the project on-line; “strangers” review the project proposal; some of them decide to invest in exchange for a share of the profits (or losses) delivered at the end of the development. This process combines the traditional process of convincing someone (usually an institutional lender) to provide the money because the project looks as though it could be profitable, and the developer looks credible, combined with the marketing of the project and the developer to attract a large number of potential financiers. You must plan for this promotional activity because it can be time-consuming, and it is most effective when it is supported by someone with knowledge of digital marketing, which might require you to hire that specialist.

For some developers, one attraction of this arrangement appears to be that it taps into the wide-spread interest in property investment. We hear many discussions about this subject. Some people want to invest small amounts in a number of developments to learn about the whole process. Others see this as a way to participate in property development without acquiring the expertise required, nor investing the time required.

By using an FCA regulated crowd funding specialist adviser you have a good chance of both raising funds and fulfilling investors’ financial and educational aims.

In some instances, an unexpected benefit of the finance marketing has been the attraction of some potential buyers for the completed development.

As a firm of chartered accountants, ad+, is directly involved in a number of steps which require professional advice and business insight.

GET IN TOUCH

If you would like to explore the business opportunities and financial planning associated with property development, just get in touch to arrange a meeting with one of our chartered accountants.

• e:  dcharles@adplus.co.uk
• t:   0141 643 9200