Insider LDS blog – Empowering SMEs to build more new homes17th May 2022
LDS Relationship Director, Mark Roberts features as an Insider blogger, looking at empowering SMES to build more new homes.
LDS was launched with a clear purpose: to empower SME housebuilders to build more homes.
In 1988, SMEs delivered 39% of all new homes in England. By 2020, this had dropped to just 10% – a fall of 74%.
A key barrier to SMEs building more is the availability of sufficient funding for their development projects and, with costs and interest rates both rising, this issue may become more acute over the coming months.
The LDS Sales Guarantee helps to solve this problem. It provides assurance that LDS will acquire any unsold homes on a site and releases 10% deposit cash, unsecured and at 0% interest, towards project development costs.
This combination provides powerful benefits to brokers, lenders, and SME housebuilders.
Brokers can improve conversion rates and increase fees by presenting their SME clients a higher leveraged, lower risk and smoothly executed finance package which combines development finance and an LDS Sales Guarantee.
Development lenders benefit from a guaranteed exit from sites, which improves their risk profile and allows them to lend more to both new and existing SME clients.
Crucially, better access to lending and the LDS cash deposit release allows SMEs to spread their equity further, bringing forward more new projects and new homes than would otherwise be possible.
Last year, LDS launched its online proptech engine, which enables housebuilders, lenders, and brokers to create a Sales Guarantee proposal in under two minutes. This has led to a rapid increase in Sales Guarantee proposals issued, including one which transformed the viability of a site in Twemlow, Cheshire – enabling an SME to deliver seven new homes.
Case study: NRP Projects Ltd, Twemlow, Cheshire
Twemlow Green is a rural village in Cheshire, close to both Goostrey and Holmes Chapel railway stations, providing good connections to Manchester and West Coast Mainline rail services.
NRP Projects Ltd had been granted full planning permission for ten new build homes at their Twemlow site, including seven 3- and 4-bed detached houses, and three mews style affordable homes.
NRP exchanged on the site using £300,000 of their own funds, then having only six weeks to complete on their purchase.
By entering their basic project details into our online proptech engine, NRP was able to generate an LDS Sales Guarantee proposal in under two minutes. We issued a Sales Guarantee for seven houses (our Sales Guarantees do not apply to Affordable Housing), guaranteeing to buy any completed and unsold houses on the site.
We also released a deposit of £510,800, providing much needed funds to the developer who was then able to continue work on multiple sites as their cashflow was not tied up within one development.
Our Sales Guarantee also meant that we were able to provide an exit strategy on day one, which acted as a ‘comfort blanket’ for NRP as the developer, as well as their lender. All seven houses on NRP’s Twemlow site have since sold, with an overall GDV of £6,385,000.
Unlocking more lending
LDS has strong relationships with credible development lenders across the sector, with pre-agreed joint working processes including the ability to share due diligence reports, saving SME housebuilders both time and cost.
In the coming months a number of joint products will be launched in collaboration with lenders – combining development loans and LDS Sales Guarantees to provide a high funding to project cost ratio and a guaranteed sale of homes when completed.
In transforming the financial viability of development projects, LDS is empowering SMEs, lenders and brokers across England and Wales to help solve the housing crisis.
Mark has over 20 years’ experience in the development finance space, having transacted over £1bn debt for a variety of lenders including Investec, Nationwide and Assetz Capital.
He has experience working as a lender and broker in the development finance markets and is responsible for managing the burgeoning number of brokers and lenders utilising LDS Sales Guarantees.