So, you end up lumping, for example, bridging, commercial and buy-to-let in with development finance when they can actually be quite different.
This problem can be exacerbated for those who feel experienced in one area, perhaps bridging, when they see that it’s often the same lenders presenting product solutions for development finance investors.
This might be the case, but it doesn’t necessarily mean those lenders are looking at such cases in the same way. In fact, while bridging can be relatively straightforward, that’s often not the situation with development finance.
The good news is that there are options right across the board – this is not a part of the market which is short on lender options or products.
From first-time developers to highly experienced players there is finance available for all, but if advisers are going to be presenting development finance deals, then they really need to be prepared.
Development finance is likely to be one of the more significant niche sectors in 2022 and developers are preparing right now for what they want to achieve next year. That being the case, if you want to be active in this space, here are a few tips for you and your clients.
How brokers can be ready
Firstly, make sure you firm up the numbers. We work with a lot of advisers who come to us in order to access the array of development finance products on offer, and to work those deals through.
However, when it comes to this product set, a conversation which begins with, “The figures are something like this…” isn’t going to cut the mustard in terms of getting a product solution.
Without a firm grasp of the numbers – both around the need in terms of top-end finance requirements and what is required after the work – we are not likely to get too far. Come to us with a firm outline and you’re already half-way there.
Secondly, and this is especially pertinent for newer developers, make sure they have a good team around them. It can make a huge difference to have quality individuals who know what they’re doing.
Not least because this will give confidence to lenders, but we may be able to introduce other elements to the work or offer a deal that maximises a development’s profitability.
Thirdly, while we fully understand this space, it is always helpful if the adviser comes to us having carried out some initial research into what might be available and where their client or deal might fit.
Even if it’s just a ballpark idea of where the case could work that is always going to be helpful as it again means we’re a little further down the road in terms of what could be possible. We’ll then review those ideas and see whether we can secure finance which works completely for the client.
Finally, and you would expect me to say this, but utilise those businesses which specialise in this sector, especially if securing development finance for a client is a rare opportunity and you are not a specialist. No one is suggesting you miss out on these opportunities, but this market does change quickly and client needs can be complex.
You could spend a lot of time trying to make it work yourself and not get anywhere close to a completion.
If you’re not doing this week-in, week-out, then why wouldn’t you work with a packager who is immersed in this market?
You’re more than likely to find a solution you couldn’t access on your own and this is much more likely to secure a happy client willing to return to you in the future.