SME housebuilders still struggle to access funding

Alternative lenders need to support SME housebuilders as banks retrench from development finance, Relendex’s executive chairman has said.

Paul Sonabend told Alternative Credit Investor that access to funding is the key challenge facing SME housebuilders, who are needed to help tackle the housing crisis. “We are not building enough homes,” he said.

“We’re supposed to build at least 100,000 houses more this year than we’re going to build.”

Despite the urgent need for housebuilding, Sonabend said that smaller developers struggle to access finance from mainstream lenders.

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“Before the crisis, every decent SME housebuilder was getting a facility from their bank,” he said. “Banks effectively stopped doing development finance after 2008.

In the SME sector, very few SME housebuilders had facilities with the clearing banks after 2008 which meant that you were either with the secondary banks, regional or specialist, or you were in the alternative sector.

“We sprang up 2008 because there was a need for alternative lenders and there is still a need.”

Relendex focuses on funding eco-friendly homes, which Sonabend says are “fit for the future”.

“The housebuilders that we finance are mainly producing houses that have an energy performance rating of A or B,” he added.

“What we are building today are beautifully insulated modern homes with air management systems, which are lovely to live in whether it’s cold or hot outside.

These are homes built for the future. It’s cheaper to tear down an old property and build something new than it is to retrofit something.”

Relendex has recently launched subordinate participation loans – a new lending product which will provide 100 per cent of the funding required to complete a development.

Read the full interview with Sonabend here.