Earlier this month, the National Association of Commercial Finance Brokers revealed that its brokers wrote £1.8bn of new development finance business for the year ending 30th June 2016, representing an increase of 49.8% on the previous year.
However, Ashley Ilsen, head of lending at Regentsmead, explained that this growth could draw new entrants who may not be qualified to offer development finance.
“The other side to the rapid growth of development finance is that it’s been attracting many lenders who perhaps don’t have the necessary development experience or have the capacity to deal with development funding.
“…We have seen first-hand the perils of the consumer funding their development project with an unsuitable lender.
“Development requires a huge amount of expertise and experience and a development finance arm can’t be set up overnight.”
By contrast, John Waddicker, director at Positive Commercial Finance, claimed that this growth had resulted in a number of favourable outcomes for the market.
“A considerable increase in the number of lenders who now offer development facilities has meant that more brokers have access to such facilities.
“In turn, this has meant that some of the established lenders have had to broaden their proposals, perhaps working in the developers favour, thus making the finance options more attractive.
“Add to that an enhanced appetite from developers in general, and it makes for a very buoyant marketplace.”
Meanwhile, Scott Marshall, director at Roma Finance, suggested the growth of development finance had positive implications for the economy as a whole.
“Commercial funding is a good barometer for the state of the economy and the desire for businesses to grow and expand.
“As the UK has come out of recession in the last 18 months, this seems to be one of the reasons for the increase.”
Scott added that the burgeoning economy had resulted in greater liquidity in the market and more funds to lend.
“As a result of this, lenders are more confident about lending and developing products that match the market requirements and their funding lines.”