THE UK government is not doing enough to encourage small- and medium-sized (SME) property investors and developers to access alternative financing, according to a new report by specialist property lender LendInvest.
In the report released on Thursday, called Putting Finance First: the alternative route to funding Britain’s SME housebuilders, LendInvest says that not enough is being done to put words into action.
“Every week we could lend more to SME housebuilders that are struggling to obtain finance, if the government worked with us to help fund those developers,” Christian Faes, chief executive of LendInvest, said.
“The government is clearly trying to get more homes built across the UK. However, the government needs to work with alternative lenders, like LendInvest, to help get critical funding to SME housebuilders.”
LendInvest, which was a peer-to-peer lender until it closed its platform to retail money last year, has suggested a three-pronged approach to increase SME access to funding. This includes allowing alternative lenders to provide funding through England’s £2.5bn Home Building Fund. The fund is run by the Ministry of Housing, Communities & Local Government’s non-departmental public body, Homes England.
The Home Building Fund offers development finance of between £250,000 and £250m to housebuilders.
“Anecdotally, this route can be bureaucratic and slow for borrowers to navigate,” said the LendInvest report.
The second initiative proposed by LendInvest is to allow local authorities to co-invest with alternative lenders in local developments.
Finally, LendInvest is calling for the British Business Bank to appoint more alternative lenders as eligible to use the government-backed ENABLE guarantee programme.
The ENABLE programme underwrites property investment and development loans, shifting the risk away from lenders and, in theory, making lenders more willing to provide financing.
“The evolution of fintech and the emergence of new finance models are an opportunity for government to explore alternative routes to funding future homes,” Tory MP Mark Prisk, former housing minister and report co-author, said.
“What is required, as this report emphasises, is a combined effort by government and private partners to ensure small builders have access to the finance they need, to help affect the change.”
The UK’s alternative finance market grew by 43 per cent in 2016 and is now worth £4.6bn, according to the report.