Builders were asked to rate access to finance out of five, and on average respondents gave a score of just 2.15.
Now, it’s worth noting that this is the highest score seen since 2013. Back then builders were really having to go above and beyond to find funding for their projects, with an average score of a dreadful 0.95 out of five.
Since then the score has generally crept upwards, which is obviously a welcome development.
But the fact that so many smaller housebuilders and developers are apparently struggling to acquire funding for their projects is concerning.
No shortage of alternatives
If I’m honest, it’s also a little surprising. If we go back to the global financial crisis, then developers really were in tough spot when looking for funding.
There were typically only a handful of lenders with the money and the appetite to support smaller developers, and when this came to a sharp halt, there were very few alternative options available.
But there’s no question that the market is in a significantly different position today.
Look beyond the high street lenders and there are a host of firms in the alternative space who have money to spend and are actively looking for new experienced developers to work with.
By my count there must be around 20 lenders in the market today open for business for small and medium-sized developers, a healthy range of options to choose from.
What’s more, there are significant funds available for those developers. At LendInvest for example we have raised large sums from institutional investors, like Nomura and Magnetar.
But if the money is there for developers, why are they having such difficulties accessing it?
Brokers worth weight in gold
Too many developers are apparently unaware of the alternative options open to them, as evidenced from the FMB’s survey.
The high street lenders may not have the ability to provide the flexible support small-scale developers need at speed, but the rude health of the development finance sector today is testament to the fact that there are a host of alternative lenders who can.
And that’s where brokers come in.
Advisers have always had an important role to play for developers in helping them identify lending partners and which products best meet their needs.
But there is also a big educational role to consider too. Intermediaries are perfectly placed to open their clients’ eyes to the range of lenders that are keen to work with them, but who are perhaps not the traditional household names that high street banks may be.
What government could be doing
It’s also important to look carefully at exactly what the government is doing to assist developers in sourcing alternative funding.
We have made the case before that Homes England should be targeting the significant cash within its Home Building Fund through funding lines agreed with nimble alternative lenders, making use of their expertise and existing infrastructure, rather than essentially operating as a rival lender.
Local authorities could do more, investing alongside lenders in local developments too, while the British Business Bank could add more lenders to its Enable Guarantee programme in order to underwrite development loans.
By extending the Enable Guarantee to non-bank lenders, more lending to SMEs using both bank and non-bank-generated finance becomes possible.
The government has understandably trumpeted the fact that in the 12 months to the end of June 170,000 new homes were completed by developers, the largest figure seen in the last 11 years.
But we could do much more, go much further in delivering the homes the nation needs. A helping hand from the government would provide a huge boost.