Tim Noble is lending director at Brickflow
In his first Mansion House speech on 1 July, Chancellor Rishi Sunak set out his vision for financial services to be ‘more open, more competitive, more technologically advanced and more sustainable’.
While many companies within the financial services sector believe they are edging their way towards this new ‘nirvana’ – creating open ecosystems and sharing data on digital platforms – this doesn’t appear to be the case for commercial lenders, particularly providers of development finance.
West One Bridging business performance up by a third on last year
A property developer putting development finance into a search engine could be forgiven for being overwhelmed with the options presented; banks, mortgage advisers, brokers and specialist firms all peddle their wares, in isolation.
There’s not a digital platform that collates the data from these numerous information silos, giving a comparative overview of what’s available in the market.
Democratisation
Compare this to searching for a site to develop property on. Here it’s easy to gain a single overview of sites and properties available in specific locations.
And in addition to being able to compare plans, prices, descriptors and videos, there are filter tools, refining the choice further. This process of using technology to make information accessible for everyone is democratisation at its best.
So why does this not apply to the funding stage of property development? Being able to source and easily access commercial funding, you could argue, is fundamental to kick-starting the project. Yet as an industry, we make it difficult.
If a developer uses an introducer such as a mortgage broker or adviser, the former has to brief the latter on everything from the property details and planning situation to land and build costs, estimated selling price and borrowing amount.
Having shared this information with one lender, the introducer will have to spend time repeating the process in order to obtain comparable quotes (and so give the developer peace of mind, he or she’s securing the most competitive quote).
This all takes time, and even then, every lender has a different lending criterion when it comes to loan size, deposit requirement, geography, asset type and borrower profile (plus leverage terms and pricing can vary substantially across each of these components). So how can introducers be confident their developer clients receive the most competitive quotes? They can’t.
Introducers and developers cannot shop around and compare lending offers in the same way they do residential mortgages and loans. Both may have preferred lenders, but with over 50 offering development finance, and with so many variables, it’s impossible to compare the market on a like-for-like basis.
Due diligence
Due diligence is key; introducers must be ahead of the game both with their knowledge and databases, be aware of new criteria and products and know what lender is best suited to specific developer profiles.
Such attention to detail prevents lenders being inundated with inappropriate enquiries. In many cases, what the borrower wants and the lender can offer is very different, yet this is only realised after the lender has spent time and resources scrutinising the project.
Tech innovation
Given each lender has dozens of data points they need to collect before they can make a decision, and that it can take up to six weeks to search the market for loan estimates, it’s clear tech innovation is the answer.
Demonstrating the challenge facing introducers and developers, during its start-up phase, the UK’s first comparison site for development finance painstakingly collated information on each lender plugging into its platform.
Nine months in and with 31 lenders so far, Brickflow has collected 3,751 pieces of data which is constantly analysed and refined to keep pace with differing and constantly evolving lending models.
To prevent data input repetition and ensure consistency, Brickflow has a single onboarding process with online tools enabling borrowers to build their profiles and showcase their experience and projects, ensuring information is only sent to lenders that match borrowers’ requirements.
And for lenders, the platform’s unique technology automatically filters out enquiries that do not meet their criteria and its consistent information format prompts quick decision-making.
Going forward, the digital platform is extending its services to introducers, negating the need for due diligence (saving time) and returning easily comparable loan offers (saving money).
Having digitized an entire section of an industry – which no introducer or developer has the time or inclination to do – Brickflow is responding to Rishi Sunak’s call to become technologically advanced, delivering development finance loan estimates in less time than it takes to boil a kettle.