For a while now the high street banks have been reluctant to lend to the building sector where any degree of construction, new build, self build or development is concerned. This means development finance has almost ceased (particularly projects under £5m).
The net effect has been that many development opportunities (particularly residential developments) have been missed. The small and medium sized construction company has been unable to raise funding to undertake developments.
Construction Statistics UK
- In February 2013 the output of the construction industry was 7% lower than the same month in 2012
- In the three months to February 2013, output was down 8.9% on the same period in 2012, new work was down by 10.7% in the same period
- Between January and February 2013 construction output increased by 5.5%
- Private and other commercial construction work decreased 0.5% in the January to February period in 2013
This decrease was much against the national trend and is potentially reflective of the difficulty that smaller building firms have had in securing development finance.
What Can Be Done?
There is no magic answer. In our opinion there are a few factors impacting on growth in this sector of but we think that finance is pretty near the top.
Building firms and developers are as skilled and capable as ever, many are now more knowledgeable and experienced than before the credit crunch. Most are more picky about their proposals than ever. However, funding has become ever more difficult to obtain for development finance.
So, if we were to say that we could;
- Raise up to 100% of development costs
- Raise up to 100% of purchase costs
- No exit fees
- No long term commitment fees
Sound too good to be true? It isn’t if the proposal is right. However, we can commonly obtain 80% development finance based on a three month GDV figure (gross development value) with no exit fees and all on a rolling 3 month term.
If you want to discuss any element of development finance (or refurbishment finance) then either add your comments above or contact us via the website.
Source – ons.gov.uk April 2013