The online search engine for development finance loans, which connects borrowers and lenders, launched at the end of October.
The property technology platform hopes to open up the market and provide a quick and easy way for developers to secure finance, by digitally connecting them with lenders.
Launching with “instant access” to 18 lenders, covering senior and stretched senior debt nationwide, it now has a waiting list of further finance providers to onboard.
Property developers can use the platform to secure loans between £150,000 and £100m for various schemes, including new builds, conversions and permitted developments.
For lenders, the platform automatically filters out any enquiry that doesn’t meet their criteria, and it aspires to complete all loans within six weeks if required.
In an exclusive filmed interview, DFT asked whether Ian expects Brickflow to increase development finance loan conversion rates.
“Absolutely,” he responded, “that was one of the main aims of the platform.”
Ian shared that when Brickflow was doing its market research, it spent time with the heads of development finance departments at specialist funds and challenger banks and asked for their conversion rates.
- 'You'll find a lot of institutional capital concentrating into quality,' says CrowdProperty CEO
- Brickflow names new non-executive director
- New search engine for development finance loans launches
“Everyone had a different answer,” he said, explaining that it found that most agreed that it was circa one out of every 25.
“. . . Only 4% of enquiries are going somewhere.
“For a lender, that [takes] a huge [amount of] resource, time, money and effort to deal with."
He explained that an improvement in conversion rates should make development finance cheaper, because it’s less costly for a lender to process.
Consequently, this could make “marginal sites” — due to their build and funding costs — profitable.
Ian said that the two main reasons for conversions being so low in the development finance market was due to criteria not being published or accessible, and the horrific presentation of information during application.
“A lot of lenders would say that perhaps half, or maybe even more, of the enquiries they get are just so far removed from what’s possible,” he said.
“What the borrower wants, and what the lender can deliver, are just poles apart.”
He added that the way information is presented can also vary dramatically — it can be as bad as a spreadsheet with a few numbers on it, through to a fully comprehensive presentation.
“If you’re a lender that’s got 25 enquiries in their inbox, and they know that 24 of them are probably not going to go anywhere, which [applications are the ones that] they gravitate towards?” he questions.
A poorly presented case may contain summing errors on the spreadsheets, and take two weeks for a lender to get all the information they need — all while wasting time going back and forth on numerous emails and attachments.
He adds that, after all this, and once they finally have everything they need, they look at it and realise they can’t fund it.
“[This is] incredibly frustrating for a lender,” he argued.
Therefore, if developers can present things correctly the first time, and offer all the information a lender needs to make a credit decision in a concise presentation, funding providers can make much easier and quicker decisions.
“Lenders are saying to us that they can get a presentation from us and, within half an hour/45 minutes, they can say, ‘Yes, it’s one we can do, here’s our heads of terms.’ That process can sometimes take two weeks when presentations aren’t correct, so it’s a huge timesaver for everyone.”
Brickflow is also looking to build a professional services directory for developers.
This could help lesser experienced developers or practiced professionals looking to build out larger schemes, find suitable contractors, project managers, and quantity surveyors, for example, to help plug any weaknesses in the team.
“As a developer, you want to be in a position where you can sleep at night knowing that [your project] is going to be built how you want it,” Ian said.
“We spend a lot of time speaking to people, trying to get them to understand how a lender looks at these things, and why introducing certain people into the team is a good idea.”
Ian confirmed that Brickflow is currently working on a broker proposition, with more news to follow in Q1 2021 with a pilot session.
The full interview can be viewed, below.