A healthy margin at the bottom of a spreadsheet will not pay a contractor next Friday. Available cash will.
For a property developer, the gap between those two figures deserves attention before work starts. You may expect a profitable sale and still face a shortfall during construction, particularly where money goes out before a lender releases the next stage of funding.
The useful question is simple: when does each payment fall due, and what money will actually be available then?
Put dates beside the costs
A development appraisal estimates the financial outcome. A cash-flow forecast shows how money moves through the project over time. You need both.
Ask your professional team to map the anticipated sequence: acquisition, investigations, design, approvals, construction, completion and sale or letting. Include professional fees, relevant taxes, utility connections, insurance and finance costs rather than treating the contractor's price as the whole budget.
Then check payment terms. A supplier may require a deposit before manufacture. A contractor's payment may become due before a lender's inspection or release process has finished. The dates in the building contract and loan agreement need to work together.
Check what the funding actually covers
A headline loan amount tells you little about the timing of access to it.
Ask your lender or broker which costs are eligible, what must happen before each release, and what evidence is required. Establish how your own funds must be contributed, which fees are deducted and what happens if the programme changes.
Never assume that an undrawn facility is the same as money already in your account. The relevant conditions still have to be met.
Design decisions affect the payment schedule
Architectural choices have a commercial timetable. Bespoke glazing, structural alterations and specialist finishes can affect procurement, deposits and the order of work.
Making those decisions while a builder is waiting can reduce your choices and create pressure to accept an expensive workaround. A coordinated technical package helps the team identify what needs ordering and when.
The architect, contractor, cost adviser and finance adviser should be working from compatible versions of the scheme. A forecast based on an old design can look reassuring while missing current commitments.
Test the awkward months
Ask your finance adviser to test delayed funding, a longer build programme and later sales receipts. Check the lowest projected cash balance, the additional money needed and who could provide it.
Include an allowance for uncertainties appropriate to the project. Keep it visible rather than quietly absorbing it into optional upgrades.
Refresh the forecast as actual costs and commitments become known. A forecast that never changes is unlikely to reflect a development that does.
Make the scheme clearer before you commit
At Horizon Architecture, our role is to help define the architectural scope and information your wider team needs to assess and deliver the project. Clearer design information supports better conversations about cost and timing; it does not guarantee finance or a return.
Send Horizon your site details and current drawings to discuss the architectural information your project needs next.
This article is general project-planning information, not financial, lending, tax or investment advice. Obtain advice on your circumstances from appropriately qualified professionals.
