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News From The Coalface

Tariq Mubarak, Consultant, Investor & Solicitor-Partner at Gunnercooke LLP, London, comments

Firstly, a happy, healthy & prosperous 2021 to you! As in 2020, I hope to continue sharing valuable content with you throughout 2021, starting with this article in the first publication of the new year. Now, more than ever, we need to work together to pull through to the light at the end of this dark Covid-19 tunnel.

Now, in case you are one of those readers who gets their news by just reading the headlines & sub-headings (tut! tut!), the short answer is yes, lenders are still lending. Thought I should answer this immediately just to avoid a panic! However, the devil is very much in the detail so do read on.

A large part of my clients are SME property developers, those doing small conversions and building/converting up to 10 or 15 units. I do act for a few larger developers but I have an affinity for SME businesses. The work I do for my clients starts from commenting and tweaking the first draft of their offer letters or Heads of Terms, all the way through to completion of build/construction and the onward sale or refinancing of the developed site. I am even asked to consult on the planning side - negotiating S. 106 agreements or assisting with planning appeals.

A big part of what I do to help my clients is finance - primarily secured lending from property finance lenders. This will include finance to acquire the site, development finance to build out the site and exit on to long-term finance, either with the same lender or more commonly, with another lender. In property, as in most types of businesses, it is a lifeblood that allows businesses to grow.

Shifting sands
In the past 9 to 12 months, perhaps even as far back as 18 months, I have noticed a change with finance lenders, particularly their credit underwriting function and their legal processes. I thought I should update you with what I’m witnessing in the coalface, to help you prepare, especially if you are planning on looking at a finance related transaction this year or later.

Arduous credit underwriting
Whilst I have brokered private finance from High Net Worth Individuals & SSAS pension funds, I do not broker finance from mainstream lenders so my experience of credit underwriting is based on my conversations with my clients’ finance brokers and feedback directly from my clients on what they are experiencing. I am frequently asked by my HNWIs & SSAS trustees to consult during their underwriting stage, drawing from my own property investing & trading experience. So, I have some first-hand underwriting comparative experience. There is a marked difference
in approach.

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