"You might be surprised just how many advisers don’t know anything about the project beyond the clients borrowing requirements."
Each project requires a bespoke approach as no two developments are the same and, when building from scratch, are often shaped by suitable plots if and when they become available. Then there is relevant planning consent to consider, access routes, architects, project managers, a skilled workforce and something which is often at the top of this list – funding.
Within this funding element, the advice process is a vital consideration. Especially in such a complex lending environment where some high street lenders continue to demonstrate a lack of understanding when evaluating development finance on both a local and national level. Thankfully, there are a number of specialist lenders and private banks who have the ability, understanding and underwriting capacity to make a more informed decision on individual projects and lend accordingly.
But where are these lenders?
That is the question being asked by developers who have exhausted many of the more well-known lending avenues. And this is where the value of specialist advice really does come to the fore. There are many intermediary firms who add development finance as a service to their website but this is often something of an afterthought because they a) feel like they should or b) not really care as they see so few enquiries. The danger comes when they are approached for advice in this area and they don’t really know the market. This is where a relationship with a trusted specialist partner can really pay dividends as, being an expert, they can quickly drill down into the details and find ways to present applications to the right lenders to achieve the right outcome.
Here at SFC Scotland, we speak to many developers who have had conversations with advisers who’s initial, and only, approach was to seek out the best headline rate. All too often there was no consideration made to the structure of the transaction, information sought about the project, the potential exit plan and many other factors which – if they are not taken into account - can cause more harm than good.
For what it’s worth, our approach to development finance is centred around a holistic, consultative method which really gets under the skin of a project. A one-size-fits-all approach simply does not work. The first step is to review the project in detail. This sounds obvious but you might be surprised just how many advisers don’t know anything about the project beyond the clients borrowing requirements. The next step is to evaluate the proposition, document how to structure the project and outline considerations when it comes to de-risking the project i.e. reducing borrowing to maximise profit. The final step is to provide advice when it comes to off-plan marketing, work alongside the estate agent and offer support throughout the project – not just stop when the finance has been arranged.
This is not a simple or quick process but it is a necessary one. The value of advice is crucial when it comes to development finance and demonstrating this value is the key to a happy developer. A happy developer who will continue to use your service time and time again.
