Developers that spend time building will not have the time, energy, knowledge, or inclination to assess and compare the numerous commercial lending options currently available.
Should they Google their options, or approach a bank direct? if the latter, which one?
What about contacting a mortgage adviser, broker, specialist firm, other professional services provider — such as an accountant or estate agent — or maybe a friend?
Those who have raised money before, invariably return to the same source, blissfully unaware they may be able to secure a better deal elsewhere. And who can blame them when the market is so fragmented and time consuming?
Chasing development finance, arranging meetings, showcasing experience, and repeatedly answering questions about the project — such as the property, planning situation, land and build costs, selling price, profit margins, the overall valuation, borrowing requirements, and where the deposit is coming from — can take weeks, if not months.
Overlay this with different lending criteria — most lenders work off the GDV and will lend a percentage of that (which typically varies between 55% and 70%), changing geographical limitations, building specifications, and experience requirements — and it’s easy to see why developers are overwhelmed and unable to compare these variables.
Third parties, such as brokers or introducers, face similar challenges; they need to regularly update their databases to keep track of the ever-changing lending criteria, pricing/policy variations, and new products coming to market.
As is the case with many challenges, the answer lies in adopting the power of technology and introducing a new business model: cue the launch of a comparison site for development finance.
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Brickflow’s team collated information on the requirements of each lender plugging into its digital platform. With 31 finance providers so far, we have amassed 3,751 pieces of data which are constantly analysed and refined to keep pace with differing and constantly evolving lending models.
By using proprietary algorithms and searching over 120 data points across each lender, we pair the right lender options with the project, returning instant results which are shared onscreen in a comparable table format.
Developers can then choose their preferable lending options and use online onboarding tools to complete their applications. Areas they’re prompted to cover include: developer CV, an asset and liability statement, development appraisal, site details (including location and planning permission), deposit source, and how the lender will be paid back.
Experts help them tweak their application, where necessary, and it can be sent to up to five lenders in our deal forum. The saved information is stored in the cloud, supporting future applications and avoiding time-consuming repetition.
For lenders, the unique technology automatically filters out enquiries that don’t meet their criteria, and its consistent information format prompts quick decision making.
Consequently, the conversion rate from heads of terms to completion is over 90%.
While Brickflow applauds recent news that more lenders are joining the market, the development finance sector remains difficult to navigate, and the end-to-end process takes too long. More visibility is what is needed, rather than more options.
We have a situation where developers, keen to save every penny during the build process, spend weeks and months trying to reduce their build costs by relatively small amounts, and then go onto potentially waste tens or hundreds of thousands of pounds on uncompetitive finance deals because of a lack of knowledge and transparency.