Inexperienced lenders target development finance as bridging saturated – Magnet Capital

  • 17/01/2019
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Inexperienced lenders target development finance as bridging saturated – Magnet Capital
Magnet Capital has warned that the development finance market may be becoming filled with inexperienced lenders as the bridging market reaches saturation point.


Ashley Ilsen, co-founder and CEO at Magnet Capital (pictured), told Specialist Lending Solutions that some lenders do not have the expertise to fully operate within the development finance sector.

He highlighted that development finance was a highly specialist type of financing that could not be taken lightly.

However, Ilsen warned that lenders could be under pressure from their funding lines to lend more money.

With the bridging sector already saturated he feared they may be forced to lend in areas such as development finance which they may not have the expertise for.

“This in turn causes problems for brokers and clients, as there ends up being as much ‘bad’ money available as ‘good’ money,” Ilsen said.

“The test of a good development finance lender is when the market starts to slow and more problems and potentially defaulting loans could rise,” he added.


Increase in small residential developments

Overall, Ilsen pointed out that now there is a growing demand for small residential developments, which are what the lender is focusing on.

He said: “We lend to small construction schemes, mainly residential, so Brexit is not impacting our business.

“As we lend our money, we are not seeing any of the funding challenges other lenders have been.

“We consider ourselves a funding partner, because we act as an adviser, being interested in what clients do and what they may do in the future.

“There are a lot opportunities for brokers joining this sector and it is our responsibility to offer them enough knowledge,” he added.


Expansion plans

With an average loan size up to £600,000 monthly, the lender is planning to expand its team by recruiting four to five employees over the next year. Also, it is about to sign a distribution partnership in the coming weeks.

However, Ilsen said that Magnet will not further invest in technology.

He added: “Development finance is not just about rates and expansion is driven by new ideas. Technology does not improve the speed that we need.

“Further, people want to do business with other people. Our approach is focused on meeting people in person, also for this reason we do not predict to expand our presence geographically.”

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