54% of SMEs stated that obtaining finance is the main reason for their home building project not being completed. Alternative finance is beginning to resolve this problem by offering small businesses access to the money they need in order to complete these projects.

The alternative finance provider industry is continuing to mature and develop in the UK. The traditional banking sector has faced criticism for its failure to serve SMEs in the property sector; there are upwards of 2 million small businesses in the UK, and up to 70% do not have access to finance.

Small businesses often face problems getting financing. They can’t get loans like big companies, and banks aren’t able to approve their small loan requests quickly. This is why alternative finance sources are so attractive to small businesses—they offer quick funding without all of the red -tape that comes with bank loans.

While it has made improvements, the Government may make several more changes to better support small building businesses.

The Housing Growth Partnership and other such schemes’ act as a dedicated initiatives that in some cases invest alongside smaller builders in new developments, providing money to support their businesses, helping get workers onto sites, and increasing housing supply.

These partnerships also establish a network of builders, including experienced developers, who will act as mentors and advisers to those looking to expand and grow their businesses.

Supporting small builders

In the last 25 years, the number of firms building between 1 and 100 units a year has fallen from over 12,000 to fewer than 3,000.

That’s why the government has placed housebuilding at the heart of its long-term economic plan, to get homes communities want to be built and create jobs in construction and related industries.

Click here to learn more about financing your business or to receive help and advice from us.

If you’re a property developer that’s keen to take advantage of our equity funding option, you’ll need to pick out the right project to be accepted. It might take a bit of work to discover a project that will capture the interest of investors but once you do, you stand to make a significant profit.

If you’ve got the ambition to turn around residential developments, there are several ways we can help you. For experienced developers, equity funding can help you scale up your plan. Investors understand that the housing market is lucrative and set to be even more so due to the housing crisis – put a viable, profitable development project in front of them and they’ll be eager to invest.

But how do you find your next project?

• Location is key – Investors want to back projects where they know there’s going to be demand for the developments and where historic sales prices show they can make a return. In the UK, London and the commuter belt around the capital comes out top. Other regional cities that are hubs for professionals, such as Bristol and Manchester, are good bets too.
• Develop efficient timelines – No investor wants to wait three years for their return only to find that the project is only halfway through. Your timelines need to be viable but also swift. Twelve to 36 months should be your standard project timeline where you want to attract outside investment – but don’t be tempted to be overly optimistic, keep your development goals realistic.
• Think big – Investors aim to make as much as a return as possible on projects. While a smaller development project might be appealing to you, the typical minimum equity ticket size is between £1.5 million and £2 million. You’ll need to show you have the skills and experience to handle projects on this scale too.
• Know the buyers market – If your development doesn’t appeal to buyers, you’re going to have a tough time selling. While London and other cities might be linked to soaring property prices, investors prefer to keep unit values below the £1 million mark, reaching a much greater audience.

Get in touch with use today to find out if your next property development vision would be suitable for equity funding.