Case File:
The borrower wanted to purchase a 5-bed detached executive home for conversion to a day nursery. Other lenders had turned the case down as planning permission for the conversion to a business hadn’t been granted. However, Roma Finance met the borrower and discussed in more detail their business plan – with or without planning permission.
The detached house was worth £610,000 on the open market and it had an indoor swimming pool, which would be used to provide swimming lessons, paid for separately to the day nursery. With borrower only requiring £375,000 the LTV was easily acceptable. Also, the borrowers already ran another day nursery so they had experience of running a successful business in this market.
- Funding needed for a detached house
- Planning submitted to run a day nursery
- If planning not granted borrower had a viable backup plan
- With low LTV and business potential, Roma funded £375k
During discussions it became apparent that behind the house a development was underway on a new housing scheme, with 5,500 new family homes being built, an ideal target audience for a day nursery, which when built would significantly increase the value of the business.
By digging a little deeper in to the way the business was going to be run, with two income streams (from the nursery and swimming lessons), and a ready made market with the new housing development, Roma Finance then discussed with the borrower the possibility of planning not being granted.
The borrowers clearly demonstrated they had thought this possibility through too. The backup plan was to start a child minding service from the property, which didn’t require planning permission. The business model still provided a suitable income as it could still be supplemented by offering swimming lessons to local children as an extra income stream.
With a thorough understanding of the borrower’s plans and opportunities whether planning was granted or not, Roma Finance provided the £375,000 requested.
Scott Marshal, Director at Roma Finance said: ”Because we like to get to know how a business is going to operate and any fall back options, we were able to provide the funding where other lenders hesitated. Obviously planning permission is vital for any business, but as the borrowers had a second business model based on not getting the permission, this made our decision a lot easier. Also, with a second income being derived from the swimming lessons, sufficient income was going to be generated to cover the loan payments.
“I’m pleased to say that although the planning application is still in progress, staff have been recruited and the child minding business is about to start. Because Roma Finance looked closely at the big picture and didn’t get hung up solely on the planning angle like other lenders, we have helped a worthwhile business get off the ground.”
The borrower will refinance the bridge on a longer term mortgage once either of the two strategies has been proven.
