Large development companies are making it difficult for smaller firms to operate by banking land and supplies, according to the development lender Regentsmead.

It follows a recently published report from insolvency firm Begbies Traynor showing that more than 50,000 construction and real estate firms are in “significant” financial distress.

Ashley Ilsen, Head of Lending at Regentsmead, told Development Finance Today that a better understanding of the alternative finance sector would make it easier for smaller firms to tackle the difficulties they face.

He said: “The old adage that the building industry is the first to enter a recession and the last to leave rings true and I still think the industry is feeling the damage caused by the last downturn.

“I think there needs to be more of a level playing field with some of the bigger firms that have [a] huge competitive advantage, particularly from economies of scale. As a result many of them land bank and have stockpiles of key resources such as bricks which drives up the price.

“I think there could be more education about alternative finance and particularly the finer points of what every lender offers but this is, of course, the job of our introducer partners.

Positive Commercial Finance agreed, saying that some developers are finding it difficult to secure funding.

However, the broker said all of the firms it works with are showing no signs of struggle.

John Waddicker, Director at Positive, said: “I can understand some developers finding it difficult to find funding for their project, but as we have access to a wide range of lenders, some of which are exclusive to Positive, we can invariably find finance options for our clients, particularly the smaller developer that doesn't have the cash flow of some of the bigger players.

"At Positive we haven't had reports from clients about contractors being in financial trouble.

“Indeed with the growth of commercial and development finance we experienced in 2015, the market as a whole finished the year on a high.”

It is not just access to finance that is needed to help smaller firms – introducers also need to play their part in sourcing the best option for borrowers.

Scott Marshall, Director at specialist lender Roma Finance told Development Finance Today: "When introducers are sourcing finance for borrowers, it's important for lenders to assess every case on its own merits and to have a pragmatic approach to underwriting.

“This is particularly true of development cases which can be complex if the project is a new build site.

“There is definitely no lack of appetite in the market and as a specialist lender, we work closely with introducers and borrowers to work through a transaction to find a path to lend on viable projects."