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Business planning

A Business Plan brings together in one document all the aspects of your scheme needed to make it a success.

In order for your CLT to succeed in providing affordable housing a strong business plan will be necessary in order to ensure long-term financial viability. A business plan ought to take into account a variety of short and long-term costs. For example, in addition to the actual construction costs of the homes you propose to build, the cost of land, legal fees, professional fees (e.g. your architect and surveyor) and abnormal costs will all have to be absorbed into the plan. During construction of your homes, it will be necessary to raise working capital to meet these costs, which may be obtained from the security of your land value. This may be through grant subsidy or a credit institution.

Obtaining credit from a bank will require a commitment as to how the trust will repay this capital supported by cash flow forecasts taking into account the aforementioned overheads and any cost overruns caused by unforeseen circumstances which may delay the scheme. It will also need to account for the payment of interest on the loan. As such the business plan needs to demonstrate clearly that the development is financially viable and able to develop income streams which can meet loan repayments.

The finance that will meet your loan repayments will be largely derived from the completion of your homes, turning them into physical assets which will generate income. At this point you will need to consider the tenure options of your homes influenced by the indication of need, tenure preference and level of housing affordability in your housing needs survey. Sale of part-equity homes upon completion would contribute to the repayment of working development capital. If providing rental housing, a long-term financial forecast will be even more pertinent, balancing the level of rental income against the loan repayments, interest payable on the loan, and allowance for property maintenance and tenants voids. A CLT business plan would typically provide an overview of a scheme taking these costs into account and forecasting its income over an extended period of time, aiming to eventually pay off the loans and generate a surplus through their income streams.

CLTs that have developed homes will generally have a business plan in place and may be willing to share them if contacted.