Development finance for properties from Newquay to Penzance

Fox Davidson are an award-winning Cornwall property development finance consultancy. We advise Cornwall property developers on structured finance solutions and have worked on flagship schemes in Newquay and Penzance, through to single unit builds in Sennen.

For over 15 years, we have worked with Cornwall SME housebuilders, advising our clients on their funding options, and structuring development finance packages consisting of senior debt, mezzanine finance and equity. 

We specialise in property development finance in Cornwall of £300,000, typically up to £200 million. 

This information on this page covers everything from lenders criteria to how to structure deals to allow you to put in the minimum amount of cash on day one.  The information should be useful to both first-time developers and seasoned property developers looking at alternate funding sources.

Why Fox Davidson?

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  • Fox Davidson specialise in property development funding and have done successfully for over 15 years. We are local with offices across the South West and we have relationships with surveyors, builders and regional lenders in Cornwall. We can recommend good building contractors, architects, and other professionals that are based in Cornwall and that we know have delivered quality housing stock. 
  • We know how to position funding and which lenders to approach for each scheme.  
  • We always visit sites in Cornwall person along with yourself and the funder. We want to build a relationship with you and so we do not sit behind a desk. We love developing property and seeing a scheme to develop.
  • We are recognised for our award-winning work in structuring cases for lending. We will complete for you, appraisal templates that are accepted by all lenders. We have a good reputation amongst funders for only putting forward cases that meet lenders criteria, that are well packaged and ensure the proposal only goes to the right person at the right funder for each given scheme.   
  • We will liaise with all parties that make the development happen, including the builder, architects, and other professionals. This helps to ensure an efficient process from first drawdown to practical completion. 
  • We are experienced so we offer guidance where needed and importantly we find solutions when problems arise, there isn’t much we haven’t seen and dealt with in over 15 years of funding construction projects in Cornwall.
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Application checklist

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  • Development finance appraisal
  • Link to the planning for the site
  • GDV comparables from one or more agents
  • Development CV showcasing previous projects
  • Property assets and liabilities statement
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Development finance criteria

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With over 100 lenders on our books, all of whom have different lending criteria. For the best development finance terms there are some basic rules, Lending up to 60% of gross development value (GDV) and developer cash input of 20% of total costs.  However, pushing the boundaries is sometimes more attractive as it means that you can develop multiple sites or keep cash in reserves. 

Fox Davidson fund schemes varying in size and type, from one unit to a hundred. We fund residential homeowner schemes, PBSA, retirement villages and commercial units. We can fund projects in the UK and Europe. 

Typical criteria for Cornwall property development funding:

  • 90% of total costs (land, build, professional fees) and up to 75% of GDV. 
  • Mezzanine finance and equity solutions up to 95%/100% of total costs. Joint venture for experienced developers or house-building contractors only.
  • First-time developers 
  • Loans from £300,000 to £200 million
  • Interest rolled up and repaid on sale or refinance. 
  • Rates from 3.5% over Bank of England Base rate/SONIA 
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Build-to-rent development finance

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The most competitive finance terms are reserved for clients who build property to rent to the private sector. Fox Davidson can tailor build to rent development finance funding solutions with blended rates across the initial development finance and subsequent long term investment finance. 

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100% development finance

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It is possible for experienced developers that have sites in planning and need joint venture funding to secure 100% development finance. The scheme also works for contractors who have previously built for developers and now wish to build for themselves. JV funding is not for first-time developers. Other ways we have successfully secured finance for clients without them putting in much of their own money is through deferred land payments to a landowner, joint venture with landowners and structured finance including senior debt, mezzanine, and equity packages. 

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Development finance for high-value single units

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Development finance for high-value single units is one of the areas that many lenders will not fund as there is a restricted market. Most funders are comfortable lending development finance in Cornwall and the South West for multiple unit schemes that have unit sale prices that are average for the area.  

For bespoke high-value single units typically of £2.5m plus, we partner with private funders who lend development finance in Cornwall for high-value single units. 

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Small development finance

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Small development finance is available to developers who wish to build single units or a couple of units at most. Lending is available from £300,000 upwards. Small development finance is available from niche local lenders in Cornwall and across the South West. Note that small development finance loans are often priced higher than the most competitive funding which is reserved for loans of £2m plus.

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Development finance for first-time developers

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Fox Davidson work with first-time developers for all developers must start somewhere. We offer advice base don experience, we can help you build your contacts including land agents, architects, and builders. Funding for first-time developers is not an issue provided the rest of the case stacks up. We would need you to be using a well-funded main contractor and probably to employ a project manager.  

Your net asset position and cash available to go into the project at the start are equally as important. Cornwall property development finance companies will want to see between 10% and 20% of total costs cash input and net property assets to cover up to 20% of the loan amount. Lenders take security in the form of a debenture over the borrowing company, an unsecured personal guarantee (PG) which will be a % of the loan amount or cover interest and cost overruns. The lender will need a first charge on the development site. 

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Personal guarantees

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Most lenders require personal guarantees, or PGs. Developers who do not wish to provide them will need to put in more cash. We would expect gross funding to not be above 50%/55% of GDV. 

Personal guarantees range from 20% of the loan amount to covering interest and cost overruns and may be both limited or unlimited. They are usually always NOT secured against other property.

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Planning

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There are of course various types of planning, outline, detailed, pre-app and permitted development including Class Q.  

Lenders require a site to have full detailed planning for you to draw down funds although some will consider sites with outline planning if funding is needed to secure the site. For sites without full detailed planning, we recommend agreeing a conditional exchange with completion on receipt of full planning. This should be negotiated via your solicitor.   

Lenders are happy to lend if permitted development will cover the works.  

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Barn conversion development finance

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Barns and agricultural outbuildings are now able to benefit from permitted development. This is known as Class Q-permitted development rights. Lenders will lend if a site has Class Q PD planning in place.

Barn conversions are more complex than ground-up new builds and lenders will look to the developer for previous experience or where there is none the contractor will need to be experienced at completing barn conversions.

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Property refurbishment finance

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Lenders will price property refurbishment finance by the cost and type of work you intend to carry out. As a rule, property refurbishment loans require a 25% deposit with the funder providing 75% (gross including rolled-up interest and fees) and 100% of the cost of works, subject to approx. 70% of the GDV.  

Property refurbishment finance is useful for PD conversions, HMO refurbishments and auction property purchases. Funding can be arranged within a few weeks.

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Development finance for overseas clients

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Funding is available to limited companies in the UK, but the directors and shareholders do not have to be resident or UK domiciled.  

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Development finance is not all about rate

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Development finance is not all about achieving the best rate of interest. There are considerably more factors that should be held with equal or more regard including: 

  • How well funded is your lender?

During the lockdown of 2019, several lenders stopped lending all together. Peer to Peer lenders that have almost become household names amongst seasoned developers stopped lending overnight. But not only peer to peer lenders, several high street banks such as NatWest and Metro bank all stopped lending. One of the most important factors you should be considering is how well funded is your lender? Where are they securing finance form, am I going to have issues securing drawdowns from them. As a developer, you are relying on a lender to lend you funds for typically 12 to 24 months. If a lender runs out of funds or their funding line is pulled then you will be left probably having to mothball your site whilst you organise new funding, all of which will eat into profits, possibly making the scheme unprofitable. We have seen this happen.

  • Who are you dealing with?

It is all very well securing cheap money but who are you dealing with at the bank, how experienced are they in property development, what influence or flexibility can they exercise should you need to change the loan you require or want an extension. How involved are they, perhaps too involved! Are they smart enough to help you secure the funding or will they close shop if you say the wrong thing?  We work with lenders that insist on monthly QS visits, and we work with lenders that do not do valuations or site visits at all. Selecting the right lender and the right people working at those lenders is key to forming a good relationship between funder and developer. 

  • Other factors

If a lender takes 2 weeks to release a drawdown can you cope with waiting to pay your contractors? How flexible is your lender should you wish to extend or amend the facility? Does your lender accept soft equity through planning gain or deferred land payments to the vendor? Some lenders do not roll up interest but instead, ask you to service the loan monthly. There are many moving parts to development finance and at Fox Davidson, we are experienced enough to understand all of them and to look after our clients’ interests. 

Fox Davidson are instructed by our clients to secure the best terms for them. All that we do every day is development finance, we make new relationships with new entrants to market almost daily, we keep up to date with over 100 funders changing criteria and appetite, we dismiss lenders that do not do what they promise and do not recommend lenders that have hidden charges or are impossible to deal with. By outsourcing the sourcing of your property development finance in Cornwall and across the South West, Fox Davidson will save you time, money, and stress, leaving you to deliver quality residential and commercial property.

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Fox Davidson are an award-winning development finance broker in Cornwall.

We can help you finance a commercial development in Newquay, barn conversion in St Ives, residential mortgage in St Austell, property refurbishment in Truro, small development project in Bude, and more.

For funding on development sites in Cornwall, please call our South West property finance team on 01179 897950 or email us at enquiry@foxdavidson.co.uk