Exclusive: Specialist development lender gives introducer advice

Exclusive: Specialist development lender gives introducer advice



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In a very tough lending market how can an introducer maintain their income levels? Bridging and Commercial got the insight into how to successfully introduce development loans from James Bloom, CEO of Regentsmead.

In the development sector there is a dearth of active lenders although there are many lenders who purport to be lending but actually aren’t. The development sector however does still offer real opportunities for brokers and can be potentially lucrative providing that introducers ascertain whether a deal is truly fundable and who the lenders are who are actually still lending into the market.

The main reasons for this have been the downturn in the housing market and a lack of contingency funds from the borrower. The most important point that a broker should look for when they receive a new proposal is how much capital the client has available. Cash is king and whilst lenders are here to write business they want to ensure that clients have sufficient funds to invest before they commit to a project.

When brokers receive a proposal they need to look at several key factors:

  • - What experience the borrower has.

  • - What capital the borrower has.

  • - What margin the borrower is working on.

 

Without satisfactory answers to these key issues a development case is going to be very hard, if not impossible, to fund in this market. Nick Warren who Heads the Lending Division for Regentsmead Limited says “Development experience is critical with any projects we fund as we only want to deal with clients who have the necessary expertise to undertake a scheme. Previously we have funded inexperienced borrowers and found they have incurred problems which have been difficult to resolve and in a tough market this experience is vital.”

In the past heady days developers rarely approached brokers as finance was easy to obtain on the High Street, however the difficult development finance market offers real prospects now for the pro-active introducer as developers generally do not know where to go.

There will be plenty of developers who do not even know that development finance is available and this is where a pro-active approach for an introducer could well mean substantial rewards.

When getting a suitable enquiry it is imperative that when an enquiry is received that the vital basic information is taken from the client. For example, not every lender has the same criteria so brokers need to find out the location of the project, the type of scheme (a new build, refurbishment or conversion), site purchase and build costs together with the end value. There is going to be more detailed information required from the lender but obtaining these basics will provide enough to initially evaluate the proposition. The level of information required by a lender will vary but most companies will want to reduce the work that the broker does. Nick Warren comments “We ask for basic information on a deal leaving a broker to sit back and relax until we collect their commission and pay this to them”.

The financial climate is still precarious but there will always be a need for new homes and invariably for funding. The common misconception that development funding is unavailable is not correct as for the right projects there are some specialist lenders who are more than willing to lend. Brokers needs to familiarise themselves with what each lenders criteria is and then refer suitable cases to be considered. The high street banks may have turned their backs on developers but there is longstanding commitment from others who have continually supported the sector despite the uncertain economic position. Nick Warren comments ‘We have been exceptionally busy over the last few years and have always shown our commitment to assisting developers in what has been a very illiquid marketplace’.

For further details, please contact Regentsmead on 020 8952 1414 or visit

www.regentsmead.com

1 Comments

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    Sean Wilson

    I wish to finance the purchase of a North London Property from another family member and then renovate it. The house purchase will be £250,000 and the renovation costs in the region of £100,000..

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