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Construction funding market update

Construction funding market update

There have been a decent handful of new entrants into the development funding space over the last year since we last evaluated the sector so we thought it worthwhile sharing our views and suggestions on how to navigate choosing a lender.

Here are some key questions you really should consider asking your prospective lending partner before committing on the dotted line;

  1. How many construciton loans did you do last year?
  2. What is usual turnaround time for indicative approval and then full approval?
  3. Have you ever issued a term sheet and not been able to raise the money?
  4. Can you provide an outline of how detailed your Credit DD requirements are?
  5. Can you show me 5-10 recently funded projects similar to the one I am about to undertake?
  6. Can I choose my own valuer and/or QS or do you insist on choosing and keep me from talking with those consultants?
  7. Could I talk to 2-3 referee developers who can give me a feel for how you conduct yourselves as a lender?
  8. Can you give me examples of where you resolved a loan situation where things haven’t gone according to plan and you were considerate of the developers needs i. e. a time extension was required through no fault of the developer?
  9. What is usual turnaround time for progress claims?
  10. Have you ever not been able to pay a draw-down of a project due to liquidity constraints?
  11. Have you ever shut the doors to new lending for a period of time i.e. during Covid did you still operate and fund new projects?

HC welcomes discussions around these factors, whether it relates to lending via HCP or any other of our approved funding providers,   these discussion are an important part of building trust and confidence in the relationship.

It is somewhat akin to choosing a builder, you want to know they are seasoned professionals not cowboys who are learning on the job and using you for that experience.

We believe that it’s important that every element of your project, including the funding, is properly scoped, costed and documented so that you can concentrate on the risk factors you have identified without surprises.

Happy funder hunting.

By Dan Holden

28 March 2024

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