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Ashley Ilsen


A Guide: What is the difference between bridging finance and development finance?

By Blog, Development Finance, Lending

Those looking for property finance will often confuse bridging finance and development finance. Whilst it is true that they do have similarities with each other, such as:

  • They can be used to help fund the purchase of residential and commercial properties
  • They are secured loans
  • They are often used to avoid traditional property chains

They do also have a number of differences. If you are looking at getting specialist property development finance to help you buy a property, it is important to know the difference between the two, so that you can find the right product that you will require.

When is bridging finance used?

Generally speaking, bridging loans are linked to completing properties on a tight deadline. This means that most borrowers tend to opt for bridging finance when they need to complete on a flat or buildings within a month, or sometimes as little as two weeks. It can also be a popular option for:

  • Buyers looking to purchase a property at an auction house
  • Homeowners who are moving, but have yet to sell their existing property
  • Those raising finance for business growth

When is development finance used?

Those applying for development finance will use this for property development purposes.  This means that this kind of specialist finance is better suited to those who:

  • Are looking to renovate a new property from a plot of land
  • To cover construction costs
  • To extend or build up a new property

How funds are released with bridging finance

If you decide to go with a bridging loan, this will typically be provided upfront in one lump sum, enabling you to complete the purchase of a property on time. For an auction, this is particularly important, as you need to provide the full funds within 28 days of the gable hitting.

How funds are released with development finance

If you choose development finance, the funding you receive will usually be in instalments, based on different stages of the property development process. Payments will be provided once the current work has been signed off by a surveyor.


Before applying for funding, it is important to be aware of the fact the loans are released differently depending on the product you choose.

One of the main reasons that money is released in instalments with this kind of finance is because lenders want to make sure that the loan amount given is proportionate to the value of the work that is being undertaken.

It provides a number of benefits, as it helps to maintain positive cash flow and it makes sure you keep within budget.

Average loan terms

When it comes to both bridging and development finance, they both tend to have very similar loan terms. This is usually anything from 6 months to 15 months in total.

Once the loan term comes to an end for either type of finance, the repayments are rolled up (unless they have been paid on a monthly basis) and then the loan is fully repaid once the sale or completion of a property has gone through.

In the event that the property has not been sold or completed, then the borrower has the option to refinance with the same lender, or choose a different lender. However,  it is important to keep in mind that terms of the loan may not be so favourable to you the second time around with either loan types.

How the amount you borrow is calculated through bridging finance

Your bridging finance loan will be calculated on the loan-to-value (otherwise known as LTV). That means that the borrower needs to pay a deposit, and then the rest is paid by the lender.

How the amount you borrow is calculated with development finance?

Rather than your loan being based on the loan-to-value, a development finance loan is calculated on Gross Development Value (GDV). This refers to the overall value of the loan once all construction and renovations have been complete.



A Guide: What happens if you are rejected for planning permission?

By Blog, Development Finance

What can you do if you are rejected for planning permission?

If you have recently made a planning application for a building project and had it refused, you may be feeling disappointed, and perhaps wondering what your next step should be.

No need to fret: there are still a variety of options available to you if your application is denied. Read the guide from Magnet Capital below to see what you can do if your planning permission application is refused.

Why has my planning permission application been denied?

There are a number of reasons as to why a planning permission application can be refused by local authorities. The most commonly cited are as follows:

  • Your building project would restrict road access
  • The building overshadows a neighbour, blocking light
  • The project would cause a loss of privacy to other surrounding homes
  • It has a negative impact on highway safety
  • Your property is a listed building
  • The building project impacts on trees
  • The project uses hazardous materials
  • The building projects appearance would be out of character with the existing property

Make changes during the application process

The planning permission process will typically take eight weeks, or 13 weeks at most if it is a more complex project.

In this time, you can make objections to some of your plans and it could potentially determine the outcome of your decision.

If objections are raised, it may be possible to make changes to your current application, providing that they are small and will not require the planning officer to start the process again.

Objections raised during this time, and a willingness from you to make changes could also see the planning office grant you planning permission, based on the condition that you confirm that you will address the objections. You will have to provide evidence to your local authority of having done this, and usually within a certain time frame.

Resubmit your application

If planning permission has been denied, and it was rejected on planning grounds that you believe can be resolved, then it may be worth making changes to your existing application and then to resubmit once more.

In terms of cost, resubmitting a planning permission application may be a little time consuming, but it won’t cost you anything more, providing that you resubmit the planning permission application within a 12 month period, and the overall outcome of the project still remains fairly similar to the originally planned project.

Launch an appeal against the rejection

If you believe that your planning permission application refusal has been unfair, then it could be worth investigating further about an appeal.

If you do decide to make an appeal, you will have to do so within three months (the deadline for homeowners) whilst if you are a developer, major projects will require an appeal within six months.


Making alterations to your planning permission application could make all the difference.

If your planning permission application is rejected, the council will automatically send you further information as to how you can appeal the decision.

When making an appeal that council has to respond to it within a period of six weeks. After you have received a response, you have three weeks in order to comment and provide any supporting evidence.

Get professional advice

If you are unsure as to what your next step should be, and what changes you might need to make, why not look at getting professional advice first before making a decision? This may be particularly worthwhile if you are intending to go through the appeals process, which can tend to be complicated and are used for the intention of being the last resort. As a result, a property finance adviser could help to give you clarity on the next step you should take.


Why Transparency is key to a Successful Development Finance Offering

By Opinion
I sometimes find it a bit of a cliché when lenders chant the mantra of ‘the devil being in the detail’.

This is of course completely true when it comes to underwriting a new loan, but this is also easier said than done. Is there something us as lenders can be doing to help a property developer client be as profitable as possible?

When we first look at a new development finance proposal, one thing that’s for certain is that the costs we are presented with on day one are unlikely to be completely accurate. Some expenses will be missed, delays will happen and ultimately a developer’s costs at the end of the project will often be some way away from the initial appraisal received. With the full effects of Brexit on building costs not fully known at this point, it’s more important than ever for developers to make sure that their costs are as accurate as they can be. One area I find that is often overlooked is the cost of development finance, and I believe that lenders should be doing more to be completely transparent about what the cost of funding will be to a developer client from day one, and what this means for their bottom line. This includes being completely clear about hidden costs, such as extension fees, admin charges or any other unfortunate ‘extras’ that I’ve seen pop up in some loan agreements.

The beauty of development finance is that there is more than one way to skin a cat. Every lender approaches development funding differently and more choice can only be a good thing for our market. I do, however, find it slightly disconcerting when a client chooses to go with another lender on the basis that their offering is ‘cheaper’ despite the lender not being fully open about other charges that may not initially be declared. Sadly, it happens all too often.

Our industry has come a long way over the last decade. Reputationally we are wonderfully positioned compared to where we were when I joined the industry in 2012.

It is though, essential that we continue to improve our standards, which includes being completely honest, open and transparent about the way we charge our customers.

At Magnet Capital we thrive on repeat business, with both our broker partners and developer clients. One of the reasons this is the case is because by being transparent on day one, our clients can pinpoint as accurately as possible where their profit will sit come the end of their project. Fewer nasty surprises for a client at the end of a facility term means a much more likely chance of developing a genuine and successful long-term relationship. Trying to predict where the market will be in 12 months, along with fluctuating costs, is making property developer’s jobs harder than ever, and it is therefore our role as lenders to help them as much as we can.


A Guide: What information do I need to provide for development finance?

By Blog, Development Finance

If you are looking to apply for development finance in order to be able to fund a building project, then it is important that you prepare as much as possible before making your application.

There are a variety of things that you should be taking into consideration, so that you can carefully plan the application that you make, and in order to ensure that getting a development finance loan is the right option for you. We take you through the information that you will need to provide, as well as overall lending criteria for development finance.


Lending criteria for development finance

It is important to keep in mind that development finance lenders will usually consider application on a case-by-case basis. However, it is still important to keep the following points in mind too:

  • Term of loan: this will usually be between 6 and 18 months in total. Some lenders may be more flexible with the terms of a development finance loan, but you will usually find it is a period of 12 to 18 months without any penalties for paying the loan earlier than anticipated.
  • Loan to value maximum: this will usually be in the region of a maximum of 55% of GDV.  The lender will consider how much you are wanting to borrow as a percentage of the gross development value of the completed project. The maximum loan value that you can receive based on GDV is usually 55% but it can be higher.
  • Experience: the level of experience of the property developer will also be important.
  • Security offered: the building or site offered as security must be suitable
  • Location of the development: the location of the site or building will also be taken into consideration.
  • Feasibility of the project: the lender must believe that the project you intend to carry out is feasible. If they have too many concerns, your application could be rejected outright.

What information is needed for a development loan application?

In terms of the information that you will need to provide to a lender when applying for a development finance loan, you will find that you will require these details:

  • Details of the site or building: this includes the value, location and the price of the site or property
  • Development costs
  • Development appraisal
  • Planning permission details: what you are intending to build and what permission you have already for the site
  • Gross Development Value details: this includes providing evidence of the expected end value to the lender.
  • The details of all applicants involved. If you are a limited company then the directors details will all be required too. This includes the history of previous developments carried out, how successful they were, their CVs, and project profits from previous developments.
  • Who the main contractor will be
  • Who will be the project manager for the development finance project
  • Company structure
  • Asset and liability statement for the company directors or applicants involved


What paperwork will I need to provide?

Other important items you will need to provide include:

  • A detailed breakdown of all project costs
  • All designs and drawings of the project
  • Planning permission details and applications
  • A complete schedule of works for the project
  • Details of professionals involved in the project
  • Details of your previous development experience
  • A completed Asset, Liability, Income and Expenditure Summary (ALIE)
  • A planned exit strategy for the project being carried out

A Guide: How funds are transferred in development finance

By Blog, Development Finance

Development finance loans can make a fundamental difference to the process of renovating for property developers, helping to provide cash flow so that the work can be completed in the most efficient way possible, without having to worry about how the project will be financed, also helping to reduce potential stress.

However, if it is the very first time that you have applied for development finance, you may well be wondering as to how the funds are transferred, and how the overall process works.

In this guide, we will explain in detail exactly how the funds are transferred in different stages over the course of a building project.


Why is development finance given in stages?

It is important to remember that development finance loans are always released in stages through a number of payments. This is because development finance lenders want to ensure that the loan given is proportionate to the value of the work being carried out.

It is also to make sure that the loan is being used under the conditions initially agreed on by the two parties concerned.


Securing the purchase

The first stage of development finance funding will typically involve securing the site. The lender will usually provide an agreed set amount upfront, so that you the buyer are able to complete the purchase of a property.

Whilst the exact amount that is provided upfront will often be dependent on the development finance product that you choose, you can usually expect this to be somewhere in the region of 40% to 50% of the current valuation of the site.

From this aforementioned figure, charges and interest will be deducted, which will then leave you with the net development finance loan.


Payments in stages

Throughout the course of the build, payments will be released in stages by the lender. This is to help you to continue working on the building project. Payments are released once the current work has been signed off by a monitoring surveyor.

The surveyor in question is instructed by the development finance lender to manage the site and work, in order to ensure that everything is on track with the project.

Typically, the monitoring surveyor will carry out checks to ensure payments are released.These include checking that the work has been completed and meeting the terms and conditions of the loan itself.

This includes abiding by the agreed upon build schedule, as well as cost management and ensuring that the quality of the work carried out is to a high standard.

If the monitoring surveyor finds any discrepancies during the building project, compared to the agreed upon plan, then it is possible that the stage payments for development finance could be delayed.


Cash flow management

One of the great things about development finance is that it enables you to keep the cash flowing throughout a building project. Make sure that you follow the work schedule, as well as keeping a cash flow forecast to ensure the project runs smoothly.


Accuracy of building schedule

When it comes to development finance and cash flow, it is extremely important that your costings and build schedule is accurate in order to keep everything on track.

This is important, as whilst lenders will usually be happy to release equal amounts each month, you could find some months more expensive than others.



A Guide: What building work requires planning permission?

By Blog, Development Finance

If you are looking to apply for funding through a development finance lender, it is highly likely that you will be using this loan in order to finance renovation or construction costs for a building you have purchased. However, the last thing you want to do when carrying out construction work is to poorly plan it, and potentially end up not getting the planning permission you required and having to knock the building down, or pay a fine. But which types of buildings need planning permission, or what kind of projects do? We decided to point out the key facts so that you are fully aware of when planning permission is needed.


If you are intending to add an extension to your property (providing it is not a flat or maisonette) it will usually fall under the category of permitted development, therefore meaning that you will not need to get planning permission. This is as long as it falls into one of the following categories:

  • The planned extension will not be higher than the highest part of the roof
  • It is not going to e more than have the area of land around the original house. This means as it was seen in 1948, after this it is considered as newly built.
  • The planned extension is not forward of the principal elevation or is it a side elevation that goes onto a highway.
  • If it is a two-storey extension it is no closer than approximately seven metres to the rear boundary.
  • The extension does not include raised platforms, verandas or balconies
  • If it is a rear extension, the maximum height of your (single-storey) extension is no more than four metres high
  • If there are any upper-floor, side facing windows, these have been obscure-glazed.

Sheds, garages and greenhouses

If you are deciding to create an outbuilding like a shed, garage or greenhouse, these will also fall into the permitted development category. It is possible for you to build a garage or an outbuilding on your property without getting permission providing that it is considered to be of reasonable size.


Have you checked carefully to see if you are liable to get planning permission for your renovation?

That is, it should be no higher than 4 metres. Of course, there can be exceptions where planning permission may be required if it is not a typical outbuilding. In this scenario, contact your Local Planning Authority or your Planning Portal in order to obtain more details of potential planning exemptions for outbuildings.

Indoor renovations

If you are looking to carry out internal works to a building that you have bought, such as a garage conversion, adding a new kitchen or bathroom, creating a loft conversion or rewiring, you will also not usually need to get planning permission.

However, if you live within a Conservation Area, or if you are looking to make renovations within a Listed Property, then you are advised to check with your local planning authority (LPA) first.

Changing the use of a building

If you are looking to undertake a project that means you are hoping to completely alter the building from its original use, then it is probably the case that you will need to apply for planning permission.

New building

Looking to create a new building entirely? You will also most likely need to get planning permission for it before going ahead and start construction works. Deciding to go ahead without getting this permission is risky, and financially so too. You could receive an enforcement notice from your local council, and ignoring could entail a number of legal and financial consequences for you.

How much does a planning application cost?

If you need to get planning permission for the work that you intend to carry out, then there will be fees you will need to pay. If you are making a full application for a new single dwelling in England, then the cost will be £462, whilst different fees apply in Scotland, Wales and Northern Ireland. Meanwhile, if you require planning permission for certain types of home improvements you are carrying out, this will cost you around £206 in England.

How do I apply?

Luckily, to simplify the procedure, all local planning departments use the exact same application form for planning permission, known as 1APP. This form can be found in your local area and the application can be done online via a Planning Portal.


A Guide: What are the typical costs involved in development finance?

By Blog, Development Finance

Unsure as to what sort of fees you should expect if you are applying for development finance? No problem at all. In this guide, we take you through everything you need to know about the other potential costs you could incur so that you can make an informed decision.

Arrangement fees

When getting a development finance loan, it is usually the case that the chosen lender will charge you the customer an arrangement fee. This refers to organising the loan itself and covers the cost of the work done by solicitors as well as their administration. The exact cost of this will be clearly declared upfront.

Surveyor costs

You will also need to take into consideration the cost of valuation fees when taking out this kind of loan. A surveyor you use, (or otherwise allocated to you by the lender) will cost you anywhere between £1,500 +VAT and £3,000 +VAT for an initial site inspection.

Remember all the costs that will need to be factored in when getting this kind of loan.

Stamp duty

Another fee you will need to remember to think about is stamp duty. Stamp Duty Land Tax is a lump-sum tax that is charged on all property and land that is bought across the UK. The exact amount you will pay for this will depend on certain variables, such as the purchase price of the building, and whether it will be used for residential or non-residential use.

Construction costs

Of course, when taking out a property development finance loan, you also need to factor in the costs of construction costs for carrying out your project to completion. Always make sure you have made a plan before carrying out constructing work and make a budget that you are comfortable that you will be able to stick to.


Development opportunities created by Brexit

By Opinion No Comments

Given all the pessimism surrounding the current fractured state of politics in the UK, the underlying fact is that the Government needs to boost the supply of housing, not least affordable and social housing. In fact, all three, or is it now four, of the leading parties put increasing the stock of housing at the top of their agenda. There is a structural shortage of houses being built. The target is 300,000 plus and only 130,000 were build last year so at the more affordable end of the market there will always be demand. I am out at least once a week around the country visiting our clients and introducer partners and outside of London there is plenty of building taking place of the type of affordable houses that is so badly required. So there are significant opportunities for those brokers and lenders who have the experience and grey hairs to lend sensibly in an uncertain climate.

Magnet Capital’s focus is about how we infuse our traditional lending model, which is based on the premise that people do business with people with the efficiencies that modern technology can bring to the underwriting and administrative process. This ensures we deliver funds as seamlessly and as quickly as possible. We have put our money where our mouth is by having a dedicated inhouse resource, who focuses on proprietary systems to ensure we are automating the process where possible, without detracting from what Magnet Capital does best, personal lending. However, nothing beats pulling on the wellies and going to visit our clients on site.


New style lending, with old fashioned principles

By Opinion No Comments

I’m getting asked a lot these days what it’s like to start a new lender in such a testing, saturated market. My response is that I don’t see us as a new market entrant. Ultimately people do business people. The Magnet Capital team is obviously a relaunch of a previous business, but it’s great to be able to bring something fresh and innovative to the table. In my opinion the key to succeeding in today’s marketplace is innovation. As a lender, do we dare to do things a little differently?

The beauty of development finance is that there’s more than one way to skin a cat. Our approach is deeply rooted in decades of ‘old fashioned’ lending principles, however, we are twinning this with a new style of doing things including technology that allows us to be as efficient and streamlined as ever.

My main concern about introducing too much tech as a core part of a lending business is that you run the risk of depersonalising the borrowing experience. As I mentioned, people do business with people, and I think when you’re borrowing money to support the growth of your business it should be done face to face with individuals you can trust, and not a computer screen. At Magnet Capital we place a big emphasis on meeting every single person we lend to, in our office before the loan starts and then on the development site whilst the building project is ongoing. Aside from being great for building relationships, as a lender I think it’s vital to go and look at what you’re lending on. It’s not rocket science, it’s a bit old fashioned, but it’s amazing how many lenders aren’t too interested in looking at what they’re lending on, and meeting the people they’re lending to.