Banks label development market “too risky”

Banks label development market “too risky”


“There is no funding available for the smaller side of the development sector.” Well, not according to development lender Regentsmead. The company’s Chief Executive, James Bloom, explained why this phrase is nothing more than a common misconception regularly bandied around... 

This may well be true on the High Street. Traditional banks have now completely deserted the smaller side of the development market as small builders and developers have been labelled too risky in this market.

Large lending institutions can fail if they rely on blanket policies and computers to make their lending decisions. Are some small builders too risky to lend to in this, or any, market? Absolutely. Does this mean that all small developers are too risky to lend to? Absolutely not.

The skill in lending is in the underwriting, which must be tailored individually rather than applied to sectors or industries. This is how major mistakes occur when either over-lending to a sector happens or no lending is made.

Regentsmead is a long established principal provider of development funds and we are more active now than at any time in our history. We are currently seeing a 70-80 per cent p.a. increase in our loan book which is increasing at its quickest rate since we started lending. 

Why? Because of the substantial number of cases we are receiving on a daily basis which High Street banks have either turned down or offered such restrictive terms to that they are unworkable.

The current lending market reminds me of a notice I saw in a dry cleaners when I was a child. It said, “We offer credit but only if you are over 90 and accompanied by both parents.” The traditional High Street lenders cannot, in this climate, admit that they are not lending. But try to get workable terms from them on a small development and you will see that they are not really lending at all.

We have recently signed up a new case via an introducer, Ian Fraser, who, for 25 years, has placed many hundreds of development deals via High Street banks. 

He approached Regentsmead recently with a case in North Devon where the client wanted to borrow 42 per cent of the GDV. He would have traditionally placed the case with a High Street bank but he knew in this market he would never get this agreed. He therefore approached Regentsmead and the offer was signed within days of the original introduction.

Ian told me: “As a long-established commercial finance broker we have a wide experience of dealing with banks and it is very refreshing to receive the good old fashioned personal service that is so often missing from other institutions.  We will certainly direct future business to Regentsmead.”

Why could Regentsmead immediately fund this straightforward deal at low LTV when banks would not? Because we look at all cases on an individual basis and we do not make any blanket decisions about people or markets. Individually assessing underwriting is the absolute key to performance of a loan book. Lending too much or too little because of pre-conceived notions about a sector is very dangerous and will lead to mistakes.

This position is likely to continue for many years to come as the troubles in the Euro and economy generally will inevitably lead to more problems for banks and the need to continue to re-capitalise. The latest banking scandal to hit the headlines will only further worsen their reputations and cause the current mistrust to increase. How can we trust a lender when their own Chief Executive has to resign because of the bad practice of his own staff?

This is the time for well placed and well funded niche lenders to step into the breach and provide the funds that are so badly needed in the development sector.

To get in touch with Regentsmead contact the team on 020 8952 1414, e mail

[email protected]

or visit their site at


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