Doing Your Homework

Noel Meredith, Executive Director, United Trust Bank

A survey carried out by the NHBC late last year found that 50% of small builders have found banks still reluctant to lend. My advice to small builders seeking development finance is this; choose your lender carefully and go with a well prepared and thorough proposal.

Although the High Street Banks still have a limited appetite for development finance, there are more lenders to choose from than there were 2 or 3 years ago. However, when selecting a finance partner it’s important to look beyond just the headline costs. Choose a lender with experienced people who understand Development as well as Finance. Have a good look at the lender’s track record. Are they new to the sector and learning as they go along or can they demonstrate experience gained over many years through good and bad markets? Choosing solely on price rather than experience and reputation could prove to be a costly mistake.

Developers should present thorough and properly researched proposals. Build cost estimates should be accurate and reflect the quality of finish required for the price point being targeted and take into account the recent cost inflation seen for materials and labour. Developers should also do their homework on the local market, show why there should be a good demand for the end product and provide strong evidence that the values they’re hoping to achieve are realistic. They should also include background information on previous successful projects completed by them and their main contractor if applicable. Finally, they should be able to give the lender a complete picture of their finances. Developers presenting a solid and realistic proposal will always be warmly received at experienced and knowledgeable lenders like United Trust Bank.