The lender currently offers loans of up to 18 months, however, Ian Wilson, CEO at Acre Lane Capital (pictured above), was aiming to extend terms to two to three years.
It is now looking to set up an SPV which will allow it to increase its loan terms for ground-up developments.
“The SPV is simply a company with a single use, ie lending to developers,” said Ian.
“It relies on a tax treatment which allows the vehicle to lend in excess of 12 months, clearly good for development loans, especially in [this] sales environment, and also allows offshore investors, such as hedge funds etc, not to suffer withholding tax on the loan interest.”
Ian said that, in the current market, developers were increasingly nervous about loan terms not being a sufficient length to cover the sales period required to pay off the loan.
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“I should say it’s not just the developer who is increasingly nervous, but also rational lenders.
“We are adamant that we will only lend when a prudent sales period is appropriately mirrored by the length of the loan.
“I suspect one of the main causes of losses in the coming year, or two, will be lenders lending for too short a length of time due to issues such as tax, or investor constraints.”
He claimed that the extended terms would likely give it the opportunity to work with more experienced developers and increase its loan size to £8m-10m.
“The reality is that, all things being equal, somebody who's doing a 30-house development is probably more experienced than the person who's doing a two-house development.
“And a 30-house development takes longer to finish than a two-house development does.
“So, by definition, you're probably dealing with a higher quality of borrower as you push out the term.
“Not always, but probably.”
Acre Lane only provides funding for residential schemes, although it will also do permitted development funding for commercial-to-residential projects.