The client: A self-employed builder from Kent looking to undertake his first property development project using borrowed funds. As a building contractor the client has experience of property extensions and renovations for his clients, but has never carried out a project personally.
The project: To split a large bungalow he had recently purchased for cash into two smaller bungalows. Planning permission has already been granted.
The finance: As the bungalow was owned outright by the client, the finance was only required to cover the build costs with the exit strategy being to sell both properties to repay the loan.
There were a few challenges in placing this case:
- The client hadn’t borrowed for any development works in the past, so was unable to provide any evidence of successful business projects personally
- The client had never written a business plan before and would need one to help secure finance
- The client was looking to achieve 100% of the build costs
We took the time to get to know the client, his building business and his plans for the conversion of the bungalow. It quickly became clear to us that the client would stand a good chance of securing funding with a high street lender as long as the loan proposal was fully supported by a comprehensive business plan. So, we worked closely with him and put together a plan which included details of his contracting business (accounts, tax returns, examples of projects carried out for clients, testimonials, etc), a detailed timeline of works, copies of the necessary planning consent, and projected sale figures.
So impressed with the client and his proposal the bank offered 100% of the build costs and a land loan of £155,000 for future developments which had not been requested by the client!
The funds will be drawn down in tranches which will be agreed upon receipt of invoices and site visits from the bank's relationship manager. Agreeing to release funds in this way is extremely rare for a high street lender, but a real benefit for the client as it means saving on architect’s certificates and independent monitoring surveyors.
Property value: £400,000
Gross development value: £710,000
Build costs: £135,000 (plus interest rolled up)
Land cost: £155,000 (plus interest rolled up)
Rate: Bank Rate (currently 0.25%, variable) + 3.75%
Term: 12 months
Facility fee: 1.25% (£3,625)
Exit fee: 1.25% (£3, 625)
Consultant: Paul Keddy, 01732 471655
This is just one example of how we have helped secure finance for a client. If you have a similar scenario or something you'd like us to look at please get in contact with us on 0345 345 6788 or contact me directly at email@example.com.
4th January 2017