What Is Development Funding?

Laura M. Sands

Development funding is the term used to describe financial capital given in support of creating a new project. Such projects may include new real estate developments, community programs, building restorations or new business ventures. Development funding may be offered in the form of a grant designated for such projects and does not require repayment or it may be offered in the form of a loan.

Development funding might be used to establish new retail centers.
Development funding might be used to establish new retail centers.

It is common for individuals and corporations to seek development funding for creating or building new projects such as a business park, a banking center, a community recreation center or an entertainment complex. Such funding is usually for large amounts of money above what developers can personally afford to invest individually or as a group. Typically, such funding involves applying for a bank loan, but may also include applying for a government grant or a grant from a private foundation. This particular type of funding may also come from a private donor or lender.

Development funding can be used to rehabilitate an empty lot into a playground for area children.
Development funding can be used to rehabilitate an empty lot into a playground for area children.

Real estate development funding, in particular, is used to create new businesses, residential dwellings and communal areas, such as parks and shopping malls. Often, this type of funding is referred to as land development funding or construction funding. Essentially, it is development capital given to a contractor for the primary purpose of developing new real estate projects. This type of funding, however, may also be used to create new public and private roads or to improve existing roads.

A new strip mall might be the focus of a development funding project.
A new strip mall might be the focus of a development funding project.

Development funding may also be used to convert an existing property into one that will be used for a different purpose. For instance, development funding may be used to convert a parking structure into a playground or may be used to restore an old home so it can be used as a community center or converted into a museum. Building funding for such projects would not necessarily go toward creating a brand new structure, but would instead be applied toward the cost of restoring the property and updating it according to current environmental and safety standards.

Development funding may be used to pay for construction costs.
Development funding may be used to pay for construction costs.

While development funding is often offered through banks and private foundations, some businesses specialize in this particular type of funding. Similar to foundations, these groups may be tax exempted and exist solely for the purpose of financing special projects. In addition to basic construction needs, financing may also be used for the purchase of special equipment needed to operate a new business.

Real estate development funding is used to create new businesses or residences.
Real estate development funding is used to create new businesses or residences.
Development funding describes the financial capital given in support of creating a new project.
Development funding describes the financial capital given in support of creating a new project.

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