By Sarah Macklin 
With the number of small and medium-sized (SME) housebuilders declining, the Federation of Master Builders (FMB) and UK Finance have published a new guide to encourage more SMEs to build more homes.
In the 1980s, SME housebuilders used to deliver and build around 40% of all UK homes. This has now reduced to approximately 12%, with larger enterprises taking on the task of building new homes instead. It seems that the main reason for this is finance.
Securing finance can be seen as a challenge for small developers, and it’s something that is becoming harder thanks to the monetary increase of labour and building materials – houses cost more to build and so more finance is required.
The FMB and UK Finance aim to help developers understand home financing. Their new collaborative ‘Guide to Development Finance’ could help housebuilders to understand the range of products available and how they can apply for the products. This in turn should help them through the process and get them the finance they need to deliver more high-quality homes for the UK. While the figures may not increase to the 40% that we saw in the 80s, it could certainly give them a well-needed boost.
UK Finance and the FMB recognise the challenge of securing finance and are both committed to supporting property developers on their finance journey. Turning around the fortunes of small, local housebuilders will help the UK deliver good quality homes and boost local economies, supporting the levelling up agenda.
Brian Berry, Chief Executive of the FMB, said:
“This guide, which was developed in collaboration with the Department for Levelling Up, Housing and Communities, is an important part of a small builder’s arsenal when looking to build new homes. We know that development finance has often held small builders back, with 29% of FMB members citing it as a barrier to building new homes. The aim is that this document helps small builders through this complex, but important part of the development process”.
Berry continued:
“This guide provides a comprehensive overview of what products are available and where to get them. If we are to deliver more homes for the nation, then small local housebuilders must have barriers removed to help them deliver and I hope this guide goes someway to aid them in this process.”
Stephen Pegge, Managing Director, Commercial Finance, UK Finance said:
“Finance is a critical element when planning a small-scale housing development and lenders are committed to supporting builders access the funding they need. This guide has been created for small, local housebuilders to ensure they have the knowledge and guidance on the steps to take to get financial support. There are a wide range of finance options available, all of which could help builders undertake a larger project than their own cash would allow, in turn helping them to build homes and boost local economies across the country.”
The guide to development finance
The guide that has been newly published is an update of the original, which was first published in 2018. It talks through important topics, such as using external lenders instead of your own cash, the entire housebuilding journey (from identifying and purchasing the land to selling the properties and reinvesting your capital) and how to work with your chosen lender.
Perhaps most importantly, the guide explains how you can find finance for your desired project. It includes suggestions, like high-street banks, other banks, non-bank lenders, private equity and even crowd funding. The guide finishes with a useful list of resources and a glossary of terms to help explain any words or phrases you don’t understand.
If you’re a property developer or you work for an SME housebuilder, you can download the guide now.
