At CLS Risk Solutions, we provide financial indemnity insurance to help funders and developers remove the financial risks at different stages of the property lifecycle.

One of the biggest financial hurdles our clients face are the costs invested into planning applications. Especially when they know there’s a significant chance some of these applications will never see the light of day. In an industry first, our Planning Costs tool lets developers transfer the financial risk related to a failed planning application over to us.

For developers applying for third-party funding, our Planning Costs tool gives prospective investors the confidence they need to release more capital. And it gives self-funding businesses the opportunity to release more of their contingency fund that would otherwise be set aside to cover planning losses. In both instances, it’s got the potential to unlock more development opportunities for the business and produce a healthier return on investment.

To get a clear sense of how our Planning Cost tool works in practice, we’ve looked at two typical examples for each funding scenario.  

Third-party funding – save money and protect your equity stake

Let’s say you’ve found a prime real estate opportunity. Once planning permission is granted, you imagine the development has a future value of £5m. All you need now is the £500k to finance the planning costs.

With no insurance in place, you can apply to a private investor for a loan. But it’ll come at a price. They’ll expect 25% (maybe more) of the future equity to cover their loan’s exposure. Meaning you’ll stand to lose £1.25m.

But by having the Planning Costs tool in place, a potential funder will loan

£500k for planning costs at approximately 18% AAPR. If we assume planning’s been granted in a year, that’s £90k on top. You’ve of course now got the benefit of insurance at £75k and you haven’t had to give up any of your future equity. In this scenario you’ll stand to lose £665k, which means a potential saving of £585k.

It gives the funder the guarantee they need to proceed with their investment, without affecting your equity stake. And now you’ve negotiated an insurance policy, which you can add to as you move through each stage of the property lifecycle.

Self-funding – save money and build a case for extra investment

If you’re a business that brings forward ten planning applications, as part of your business plan might can assume three of those applications are likely to fail. At £500k each, it means setting aside £1.5m as a contingency fund to cover the risk.

But instead, you could cover each of your planning applications with our Planning Costs tool for roughly 15% of your overall planning costs. So for 10 applications, that would cost the business £750k. And you can now release the same amount from your contingency fund and start expanding your portfolio.

By shifting the risk and consequent costs over to us, it not only frees up money you’d otherwise be unable to use, but also unlocks the opportunity for a more ambitious business plan. Shareholders can see a much healthier balance sheet and you can make a stronger case for extra investment.

Unlocking more development opportunities

Although the tool differs slightly in the way it’s used, the overriding benefit still remains. At the cost of insurance, developers can unlock more capital, develop more projects and build a stronger business plan.

Talk to us about your property developments

We see ourselves as a partner in your vision. Our ambition is to enable funders to confidently deploy more of their capital into more projects, and developers to complete their projects more quickly. It’s an ambition that requires a highly personalised approach. That’s why we always craft our solutions to match your exact circumstances.

If you want to talk more about our Planning Costs tool, or any of our other solutions, get in touch today. We’ll be happy to help.

Email: Michael.Grimwood@clsrs.co.uk