“Our speed of execution is definitely one of our USPs”


Luke Jooste Merchant Money (1)

UK wide alternative finance provider Merchant Money has reconfirmed its commitment to the Bridging Loan Directory and small and medium sized developers in these tough economic times.

The London based group which was set up in 2013 offers a range of funding options to corporates including unsecured and secured business loans and business cash advance.

It has also, since 2020 under the pandemic CIBLS scheme, offered property loans to primarily small and medium sized developers and property professionals. The loan sizes range between £200,000 and £2million.

To qualify for a development exit bridging loan the property must be wind and watertight with a reasonable period to practical completion. For conversions and light refurbishment loans the property requires only light, non-structural work until reaching a habitable condition.

Clients must also be able to describe an exit to repay the loan and be in a position to offer Merchant Money a first or second charge over the property as security.

“We began with vanilla bridging loans under CIBLS accreditation,” explains chief executive Luke Jooste who joined Merchant Money in 2019 after holding senior positions at Barclays Bank and alternative lender Funding Circle.

“Subsequent to that – post-CIBLS & RLS – we were able to continue funding property deals after securing a wholesale funding line from Shawbrook Bank. We have always focussed on smaller ticket sizes and SME developers who I still feel are underserved by most of the financial markets.

There is a genuine need for support to the small to mid-sized developers who can often find It harder to obtain credit. There are a lot of lenders in this space, but I believe everyone has been getting caught up in bigger transactions.

Smaller deals have been de-prioritised. We were one of the exceptions and we have had a lot of traction by focussing on our niche SMEs.”

Since 2020 Merchant Money has funded over £20million in property loans up and down the UK including Scotland and Northern Ireland. “Because the developments are small ticket, by its nature we are involved in developments outside of the big cities. So, areas like the Home Counties outside of major cities are important to us,” Jooste explains.

The focus is on residential developments in the affordable housing side of the market. The group also does a small element of mixed use where a majority of the funded property is residential.

It can offer development finance ‘straight out of the ground to completion’ and bridging loans for developers looking to exit, fund cost overruns, delayed sales periods or release equity. The latter was particularly popular during the pandemic.

A couple of recent deals emphasise the group’s lending characteristics. Back in September this year Merchant Money funded a property deal worth £1.3million. It arose when the developer’s previous finance provider suspended their funding line just before the final phase of development.

Another recent £1.15million loan over a 12-month term arose when an existing lender could not meet the turnaround times and terms required by the developer.

“We can come into part-constructed developments where developers run into cost over-runs or need a longer sales period to repay the lender,” he says. “We come in with a bridging loan to lift the first funder out.

The majority of our property deals have been on development exits but we are getting more involved in pure development finance and equity release bridging on residential assets as well.”

Jooste says it benefits from the deep experience of its six strong property lending team. “We have all worked together for 15 years at first Barclays and then Funding Circle.

When we first joined Merchant Money, we were eager to transfer our banking and property knowledge to help the business achieve its next phase of growth,” he explains. “We are not a start-up. We are British Business Bank accredited and regulated by the Financial Conduct Authority.

We have secured funding from marquee partners including a well-known junior equity provider and a UK clearing bank. Being part of the Bridging Loan Directory also brings strong network opportunities. All of these factors are strong validations of the business and demonstrate our credibility.”

Being able to reach lending decisions quickly and accurately has also helped win deals. “Our speed of execution is definitely one of our USPs,” Jooste adds.

All of these strong fundamentals will be crucial in helping Merchant Money navigate the difficult months ahead. “The last four weeks has brought huge change to the market.

Prior to that the property market was obviously very buoyant,” Jooste says. “But the UK housing market has changed and is under more stress. I believe that asset values could come off by 10 to 15% in the UK over the next twelve months.”

Merchant Money believes that higher mortgage rates means reduced demand and that developers could require longer periods between the completion of their project and finding a buyer.

For those about to come to the end of their current bridging or development loan, they should allow plenty of time to secure an extension.

Rising construction costs, the group warns, may also eat into a developers project contingency budget faster than expected, leaving them with a shortfall in funds to complete the project.

Given the energy crisis developers should also be given even more focus to energy efficiency projects. Merchant Money states that it can provide short term finance to renovate existing structures. This includes refurbishment and enhancements to heating, lighting, and insulation.

Jooste is also confident that the affordable housing is a sector which is more insulated than others in the property market. “There is always going to be an excess of demand over supply. There will be an underlying demand for development finance into this market segment as a result,” he says.

Despite this he is hesitant to make any lending forecasts for the year ahead. “It is very difficult to say given the concerns around the wider market. We have targets in mind but as with other lenders it is very much ensuring the best outcomes for our customers. We won’t be going hard against any targets,” he states.

“I will personally be drawing on my experience which includes going through the lending and finance markets of 2008 and Brexit. If you know what to look out for you can navigate through this market disruption.

It can create opportunities in the alternative finance space because traditional lenders tend to retrench quicker than anybody else. Quality operators can benefit from volatile times.”