A borrower came to Fiduciam in a pickle. She had a development facility in place with another lender for the conversion of an older warehouse into eight flats, but the lender had its funding line pulled.
The borrower was only part way through building an eight-unit property. She had only completed five out of the eight units and had been relying on further drawdowns in order to finish the development completely.
Because the lender no longer had funds itself it meant that the borrower’s ability to access further finance disappeared over night and she was left with a part-built property and no way of funding its completion.
The situation for the developer then got worse still as the existing lender started charging default interest on the existing facility until the borrower could pay it back. The developer was between a rock and a hard place as she couldn’t access further funds to complete the development and couldn’t pay her existing loan back until she did. Meanwhile, every day that went past she was incurring further penalties with the default interest.
Fortunately, the borrower spoke to a broker knowledgeable in development funding who introduced her to Fiduciam. The broker knew that Fiduciam specialised in business and development lending and would not shy away from more complex projects.
The developer needed to borrow £1.2million at an LTV of 60% on a multi-drawdown basis. Fiduciam looked in detail at the development and saw a well-run project that had a clear exit route if the borrower could only access additional funds. The borrower had already been in communication with a high street bank about refinancing the property on a long-term loan once the development was completed. The bank had agreed the loan in principle but clearly needed the development to be finished first. Without the extra funds however, the developer would potentially face a very difficult financial situation.
Fiduciam granted a multi-drawdown loan, inside the developer’s specific timeframe, on a part retained basis at a rate of just 0.73% for a time period of 18 months. This enabled the developer to clear her existing loan, avoid further default interest charges, complete the development and successfully refinance all eight units onto a long term buy-to-let loan.
Ash Kendall, pictured, originator at Fiduciam says:
“Developments can be both challenging and risky even under normal circumstance as there can be a number of unforeseen circumstances, even for the most experienced of developers. To be hit by your lender having their funding line pulled part way through the project must be every developer’s worst nightmare – especially when the defunct lender then goes on to charge default interest.
“Fortunately, there are financially solid lenders such as Fiduciam who understand the predicament faced by developers in this situation. We have the expertise to really understand a development even part way through the build and the ability of the developer to successfully complete the project with the right help and the right funding in place. Where a project is well managed, and the exit is financially viable, we will always help the borrower giving them the time and the funds they need at a rate that is affordable.”