12
FIBA
Building the right
foundations for growth i property development
Todd Davison Managing Director Purbeck Insurance Services
The funding gap Is real— and construction firms are feeling it most
British bank lending to non-financial businesses has fallen to 59 per cent of GDP— a level not seen since 1998, according to new research from Boston Consulting Group. For SMEs, the picture is even more troubling: loans to smaller businesses have roughly halved over the past 15 years. This is being attributed to the due diligence needed to extend loans to smaller firms. And because SMEs expect to be rejected, they hold back from applying, thus creating a vicious cycle of fewer firms seeking finance and fewer loans being extended.
As BCG’ s Raoul Ruparel was quoted in the Financial Times in May, the banking sector has“ shifted from supporting productivity growth to dragging on it.”
The happy exception is in property and construction businesses. Or is it?
BCG’ s figures show that lending to smaller businesses by the banks has migrated towards real estate businesses.
The share of lending to SMEs in this sector rose from 39 % in 2016 to 51 % in 2026 – despite only 3 % of total SMEs operating in the real estate sector. However, much of it potentially involves refinancing existing buildings which are used as security for the loan, rather than funding new construction projects.
For construction firms and property developers trying to fund their next project, the lack of a physical asset to act as security makes all the difference. It often means they need to find a finance deal that will take a personal guarantee as security.
The broker’ s role in a tighter market
This is the environment in which specialist FIBA finance brokers become genuinely indispensable. Development finance lenders, bridging specialists and challenger banks have increasingly filled the space the major banks vacated, and many have built underwriting models suited to construction’ s specific risk profile.