New lending alternatives available

New lending alternatives availableIn a fast-moving and highly competitive market, developers need a good alternative to standard bank funding options, says Development Finance Partners director, Matthew Royal.Gaining access to credit can be a challenge for property developers. Traditional debt servicing calculations often require a steady income stream over time – something that many developers are unable to demonstrate.”The banks’ computerised credit risk grading models reduce a developer’s credit worthiness down to standardised numeric ratings, which largely decide their future with a bank,” says Royal, a property finance specialist.”Traditional lending standards require lenders to value a property developer’s residual stock ‘in one line’ and based upon ‘forced sale’ – discounting any real equity in the asset.”This makes it very difficult to lend against assets at a sufficient level which pays out the remaining construction debt,” Royal explains.Developers often need an alternative exit strategy – and DFP has worked with its capital partners to create a lending product that provides that alternative for unsold residual stock by refinancing the residual construction debt.”This lending option enables developers to hold onto their stock as a long-term incoming asset, or progressively sell down stock on their own terms,” Royal explains.”Some of the smaller and more nimble financiers have identified this lending opportunity. The parameters surrounding these products make them flexible, but the extended loan-to-value ratio is within mainstream banking limits, making it still an option for possible securitisation,” Royal explains.DFP advises property developers on the available range of low doc and no doc capitalised interest products at affordable rates. To find out more, contact Matthew Royal at Development Finance Partners.