FIBA Advantage Online 06 June 2021 - Page 8

ONE-STOP FUNDING : TAILOR-MADE FOR SME DEVELOPMENT FINANCE

Property development finance is a complicated business . Anyone who ’ s been on the development journey knows this , probably with the scars to prove it .
Over the past 15 years traditional lenders , who ’ d built relationships with local SME developers , have largely retreated from the market . Alternative lenders have been quick to fill the gap , and a number of approaches to funding now exist , covering every end of the development spectrum – from bridge loans to large-scale structured finance .
More than ever , an in-depth understanding of the development process coupled with financial , technical and research expertise is key to constructing the right finance for SME developers .
One-stop funding is such an approach , which aims to simplify the funding process whilst offering a number of benefits to SME developers and their financial intermediaries all under one roof .
Flexibility
Every scheme is different . Every funding package needs to be different too . Traditional funding follows rigid assessment and approval , meaning strong , smaller projects can slip through the cracks if they don ’ t tick the right boxes .
One-stop funding isn ’ t about term sheets and box-ticking , but looking at the nuances of an individual opportunity and assessing it on its merits . It requires deeper analysis but offers greater flexibility in structuring the deal – across terms , pricing and capital allocated . The end result is a greater likelihood to get a package that meets the developer ’ s needs .
Risk appetite
Today many SME developers struggle to secure financing for projects with higher LTVs . Many lenders can ’ t – or won ’ t – finance the higher ratios . By its very nature , one-stop funding has more ability and appetite to take on higher risk , thereby broadening access to finance .
Speed
The more players and moving parts in the capital stack , the longer it takes to finalise the deal . Working with different senior , mezzanine and equity parties requires months of meetings , negotiations and endless paperwork . We ’ ve all experienced the frustration of spending 6 to 8 months dealing with the hassle of intercreditor agreements , only to have the whole thing fall apart because one party pulls out .
One-stop funding delivers the entire capital stack . One set of documents , one set of surveys and valuations and zero intercreditor agreements . Deals can get fully funded in weeks instead of months .
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