Identifying lenders and overcoming hurdles for a unique business model
One of our clients, a landlord with over 30 properties, recently approached the team to seek advice on finding a lender for their most recent development project.
After investing in property for over 15 years, the client had set up a unique business model that involved agreeing a set purchase price for a property in need of renovation before completing the necessary work. The development is done before completing the purchase, so that when the property is presented to the lender, it is the finished property with all works completed.
What were the client’s objectives?
The client’s existing business model meant that they ran into difficulty when trying to source a lender as many struggled to see the benefits of the strategy in place and demanded that the purchase should be completed at the revised full market value.
There was also an issue in that most lenders’ minimum debt service coverage ratio was not met by the rent being gathered by the property.
What solutions did we offer?
Securing adequate finance remained our top priority, with the speed of the transaction also being key to the needs of the client.
Our expertise in the commercial lending sector allowed us to identify a lender who could fully understand the client’s proposal and approve the loan on that basis. The lender also showed flexibility in their approach in that the property was valued at a greater amount than was anticipated, and so they agreed to offer a higher loan so that the client could use those additional funds towards their next development project.
How did we ensure success?
Our property development team were able to provide evidence that the market rent indicated on the valuation report met the lender’s minimum coverage requirement. Our strong relationship and previous work with the client allowed us to provide a track record on projects of similar size and value. As a result of this, the lender made a policy exception, as they were able to see the bigger picture for the client’s future projects.
Our excellent working relationships within the commercial lending sector means that lenders trust our feedback on cases and recognise and appreciate the due diligence the team undertake on transactions that are referred to them.
We were able to use our knowledge of lenders to identify who could handle the case with the best turnaround time to get the case completed quickly and efficiently. The client was delighted with the outcome of this transaction and has already committed to using us again on their next purchase.
I have used Finance 4 Business for the past 4 years and I will continue to use them as I believe that they have access to some of the most competitive lenders on the market and have the in house expertise to fully understand the needs of borrowers like myself & place me with the most suitable option.
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