Roxana Mohammadian-Molina

Your checklist when borrowing with an alternative development finance lender



The property development game has many moving parts, and developers looking to dip their toe with alternative development finance need to ensure that they choose the right lender who can support them and their project throughout the loan’s lifecycle.

Alternative lenders have become a property developer’s best friend. They are they able to offer flexible, fast and tailored lending solutions. They are also often the only option when traditional lenders are unable or unwilling to fund deals that are a bit quirky or fall outside of their lending criteria. But, there are some key things to know when borrowing from an alternative lender. Here, I explain four things that everyone needs to know when trying to find a finance provider they can trust to work with throughout the project’s lifecycle. 

Tailored funding solutions

One size fit all does not apply in the property development finance game. Whether it is a piece of land with planning to build five detached houses, a commercial to residential conversion scheme or a terraced house being converted into an HMO, each property deal needs to be approached as a unique project. The ideal lender needs to be able to put a developer’s hat on and get the scheme. Typically, alternative lenders are used to working with these types of projects that are quirky, not off-the-shelf or in mainstream locations. So, top tip number one is to find an alternative lender which can get its head around what the project is trying to achieve.

Flexible payment solutions

Often, there is no cashflow while the scheme is being developed. Therefore, when seeking out an alternative lender, another key thing to be aware of is how flexible the lender is willing to be with the payment schedule. Will they be willing to roll up interest, or provide a longer loan facility with no early-repayment fee if the loan is repaid ahead of maturity? In the main, alternative lenders will offer higher payment flexibility compared to traditional lenders and some bridging companies. For example, at Blend Network, if a borrower needs a 12-month loan facility (nine months to do the work and three months to sell or refinance), we would typically extend an 18-month loan facility where we would roll up the interest for the first 12, and ask the borrower to service the interest for the last six. 

Speedy response times

Time is money in the property and alternative lenders tend to understand this better than traditional lenders because alternative lenders tend to be staffed by experts who are or have been actively involved in the market. We often hear stories of loan requests taking months to be processed through traditional lenders and high street banks, and rejected at the last minute after a long process. So, when looking for an alternative lender, another important consideration is to check its response time and customer service commitments. For example, Blend Network issues high-level terms within 24 hours of receiving a loan request.

Fees

We always hear that one gets what they pay for — and this could not be truer when it comes to property development finance. Let’s face it: borrowing with an alternative lender tends to be more expensive than doing so from a high street bank, but that is because borrowers get what they pay for — a seamless customer service, flexibility on payments, tailored lending solutions and speed in unlocking finance. So, when borrowers are searching for an alternative lender, it is not about shopping the market for the lowest rate, but about satisfying all of those factors that borrowers pay for. 


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