
Unlocking Financial Solutions: A Case Study Featuring Arc & Co. and LBB
The landscape of property development finance can be daunting, particularly for small and medium-sized enterprises (SMEs). A poignant case is that of an SME developer in Huddersfield, who sought support for a new £1.6 million residential project just outside Manchester. This project not only highlights the intricacies of development finance but also the crucial role that brokers like Arc & Co. and LBB play in facilitating successful financial arrangements.
Maximizing Financing: The Power of Broker Relationships
Despite possessing relationships with lenders, the developer approached Corey Dennis at Arc & Co. for expert advice on structuring a loan to maximize net borrowing. The resulting £1.12 million loan—70% of the loan-to-gross development value (LTGDV) and 84% of loan-to-cost (LTC)—demonstrated a notable flexibility on the part of the lender, exceeding their standard limits. This scenario underscores a significant insight: even established developers can benefit from broker expertise, achieving better financing terms than those possible through direct lender relationships.
A Consultative Approach to Structural Warranty
In addition to financing, our developer required a new-build structural warranty. Here, too, a consultative approach proved advantageous. LBB's senior consultant, Oliver Smith, negotiated a warranty premium that was below the typical rate of 1% of build costs, something rarely available through a direct quote. This negotiation resulted not only in a competitive premium but also enabled the acceptance of the developer’s preferred surveyors, reflecting how brokers can enhance the value of a project by consolidating the administrative and financial processes.
Streamlining Processes: The Efficiency of Consolidation
As the project advanced, the lender required fault indemnity policies as conditions for funding. Rather than navigating this complex process unassisted, Oliver consolidated four separate policies into a single cover, significantly reducing administrative hassle and costs for the client. Such efficiency stands in stark contrast to the fragmented and time-consuming approaches often experienced in direct dealings, emphasizing a major benefit of professional broker involvement.
Realizing Enhanced Terms and Borrowing Capacity
This partnership fostered an environment in which the developer could effectively focus on their core competency: building homes. By negotiating tailored contracts for finance and warranties, LBB and Arc & Co. ensured that processes were not only optimized but allowed the developer to retain the flexibility to manage costs and resources effectively. The outcome? A developer confident in their financial framework and capable of delivering quality housing.
The Future of SME Development Financing
As the property market continues to evolve, the case of this Huddersfield developer is indicative of broader trends where SMEs gain access to tailored financing solutions that enhance their operational capabilities. Moving forward, the relationship between developers and brokers will likely hinge even more on trust, expertise, and the ability to navigate complex financial landscapes efficiently.
In closing, the relationship between Arc & Co., LBB, and the developer illustrates a vital truth in property finance: collaboration yields comprehensive solutions that extend beyond mere financial transactions, allowing developers to realize their projects seamlessly.
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