Not a day goes by without clients asking me what the current lending conditions are, and development finance metrics with the banks, questions like “are the banks’ lending to developers again”, “what gearing can I get” and “can I get development funding without presales”.
The short answer is yes. The long answer is also yes but to the right developers on the right projects which are presented with the right information in the right way.
A lot of developers are understandably in a rush to get their project started, and out of genuine passion (or inexperience) will start shopping their project to various banks in the early stages of their development – in some cases even before they have a contract on the land. At this point they may not have put together a project plan, may only have a high level feasibility and ultimately will be putting forward a half-baked proposal to the banks to consider. And therein lies the issue.
Experience and strength of developer is key to the banks, in all aspects of the development and if they receive only a quarter of the information upfront the banks relationship manager and credit team will start to form a perception of the developer and their project, which could be to their detriment. The key is in preparation and having all of the information and structure determined upfront in a format the banks are used to.
So what sort of information do the banks look for? As much information as you can possibly give them, in the most simple and concise format – sounds easy!
For a start they need to know an overview of the project, the developers experience and management ability, the developers assets and liabilities + income situation, the builders experience (and potentially their A&L + income), details of the building contract, marketing and sales plan, proposed presales and strategy, detailed feasibility, plans and exactly what you are looking for from the bank – you should be telling them, not asking.
When it comes time to speak with the banks, developers need to be project ready. They need to have their project, structure and supporting information in the right format to get the right results. There are only a relatively small amount of lenders in the market so developers can’t afford to burn any bridges because it may restrict their development funding options now and in the future.
By Jayden Vecchio Google+