Construction finance: a cost saving guide

Finding construction finance might typically not be a problem, providing your proposal and request meets certain minimum acceptance criteria.

However, finding construction finance that’s cost-effective and a good fit for your individual situation can be more of a challenge. At ACF Direct, we may be able to help you to identify both the issues and what you can do to potentially help keep your costs down.

What influences costs?

There are many factors that influence how much you might end up paying for your construction finance. Some of these are, broadly speaking, “fixed” and there may be little you can realistically do to influence them.

They might include:

  • the inherent risks associated with your proposition. By definition, some construction projects are likely to be deemed higher risk than others and that might affect pricing;
  • the policies of a potential lender/investor. Some such entities may have very rigid lending practices that may demand a certain minimum level of pricing;
  • background economic and financial market forces;
  • the overall objective status of your business (funding may inevitably cost more if your business is in poor health);

There are though, a number of other cost-influencing factors that you may be able to affect either positively or negatively. Those things might include:

  • the quality of your proposition (cases that are poorly structured and presented can increase the perception of risk for potential lenders and that’s something that might push your borrowing costs up);
  • who you approach (some potential lenders may be much more familiar with your business sector than others – and that might influence their receptivity to funding requests as well as their associated pricing);
  • the amount you’re looking for and for how long you’ll need it;
  • how you choose to repay or reward the lender or investor (options might include standard repayments, a share of the equity in your company and so on). Some of these may be seen as being more or less suitable (and therefore more or less expensive) depending upon the nature of the project on the table;
  • how much of your own capital is being injected into the project, as lenders/investors typically like to see shared risk

What you can do

If you’d like to find a suitable and cost-effective solution to your construction finance needs, it may help if you simply take action based upon the second category of risk factors above.

In other words:

  • make sure your proposition is prepared to best-practice standards. We may be able to assist in that;
  • approach lenders who are more likely to be receptive and that implies, by definition, avoiding “blanket coverage” mass requests to multiple potential sources. Once again, we can help you to identify who the most sympathetic people are likely to be based upon the nature of your request;
  • seek a funding and repayment or ROI approach that’s commensurate with the nature of your request. For example, seeking very low-cost funding solutions if your proposition is by its nature high risk, may be unrealistic;
  • find a funding contribution, if possible, from your own sources to encourage investors to contribute more. One obvious example here might be to consider equity release if you have cash currently tied up in assets such as your home.


There is no one size fits all solution to seeking cost-effective construction finance.

It is largely a question of avoiding some of the obvious pitfalls associated with seeking such funding as well as recognising what’s likely to be needed to succeed. Those two things will be based upon your unique situation and they can be assisted by our unparalleled knowledge of the marketplace.

Why not contact us to discover more?