Partnership will support £1bn of lending for SME housebuilders
Manchester-based alternative lending platform Assetz Capital, and LDS, which has offices in Bolton and London, have partnered to support £1bn of lending for SME housebuilders and developers.
The proposal combines bespoke development loans with an LDS Sales Guarantee, enabling developers to obtain funding for up to 95% of project costs as well as a guarantee from LDS for the purchase of any completed and unsold homes on a site.
Developers of housing or suburban apartment schemes across England and Wales with gross development values (GDV) of between £1.5m and £35m can apply for a funding package of up to 75% of GDV or 95% of project costs.
The LDS Sales Guarantee assures demand for completed homes, while also releasing a 10% cash deposit which allows developers to spread their equity further, increasing their capacity to build more new homes.
The option of combining an LDS Sales Guarantee with a development loan expands Assetz’s funding solutions for SME housing developers.
Assetz Capital borrower rates on development loans, typically from 7.4%, are amongst the most competitive currently available for this type of finance product, it says, while loan terms of up to 36 months are longer than typically possible in this market.
Developers and finance brokers will also benefit from a quick and efficient approval and contracting process and shared due diligence can provide significant cost savings for developers. In addition, finance brokers will benefit from both loan and sales guarantee procurement fees, and better conversion rates due to the increased funding levels.
At the start of this year Assetz announced it would increase its lending to the SME housebuilding sector by £1bn, partly facilitated through its extended partnership with Nordic financing provider Aros Kapital.
Additionally, the company has set out its ambition to fund a quarter of all SME new builds. Assetz’s institutional and retail investors have, over recent years, been funding one in 12 new homes built by SMEs.
Ben Jenkinson, regional director of LDS Sales Guarantees, said: “We are excited to launch this alliance today which combines LDS Sales Guarantees and loans to provide a higher geared finance package with a guaranteed exit.
“The product will unlock the delivery of hundreds of new homes across England and Wales and we are pleased to be working with Assetz, a quality lender who shares our passion for supporting SME housebuilders.”
Stuart Law, CEO of Assetz Capital, said: “Historically SMEs have been essential to meeting our national housebuilding targets, but the sector has declined in recent decades because of significant economic challenges and a lack of financial support from traditional sources of capital, like high street institutions or the public sector.
“Today, we are seeing demand for new homes hitting historic levels, while supply continues to lag a long way behind, driving up prices. It is essential for consumers and our housing market that we revitalise SME housebuilding through innovative finance solutions that provide sufficient working capital and de-risk the development process, giving companies confidence to progress with greater certainty of a return on their investment.”