P2P lender offers property developer 100% of build costs and no exit fee

The client: An existing client who is an experienced developer with a portfolio of six successful residential developments completed over the past 10 years.

The client is also self-employed running another business not connected to property development.

The project: To demolish an old bungalow on a large plot and replace it with two four-bed semi-detached houses of 2,150 sq ft each.

Located in a popular town just south of Manchester, the client already owns the plot (with a mortgage) and has planning permission in place from the local authority.

When complete, both houses will be sold to repay the development loan.

The finance: Finance is required to repay the existing mortgage and fund the demolition and build.

We approached a couple of lenders for finance but couldn’t agree terms that met the client’s requirements.

One lender wanted to impose a hefty exit fee and the other was not prepared to lend 100% of the build costs.

We then took the proposal to Funding Circle where it was agreed that the development made sound financial sense based on the client’s experience and strong location of the property.

The project was duly launched onto the Funding Circle platform. Amazingly, in one day the project was oversubscribed with interested parties willing to invest.

The Terms: The following terms were agreed:

An initial advance sufficient to repay the existing outstanding mortgage.

Funding for the build will be released in stages subject to legal sign-off and the necessary consents.

Property/land purchase price
: Property owned and valued at £475k with outstanding mortgage of £135k

Build costs: £660k

Off costs: Nil

Gross development value: £1.4m

Loan amount: £795k

Loan to GDV: 57%

Rate: 8%

Term: 18 months

Repayment terms: Rolled up

Facility fee: 2% (£15,900)

Exit fee: Nil