SME property developers in Australia continue to feel the impact of significant time delays and barriers to finance from traditional lenders.

Given the role rapid access to funds can play in the success of both individual projects and the long-term careers of developers, this lack of certainty around access to funds puts SME developers at a major disadvantage.

Developers can overcome these challenges by acquiring a deeper understanding of the way that financiers think, as well as tapping the knowledge of specialised lenders with expertise in the property sector.

SME developers still neglected by banks

Despite the critical role traditional lenders should be playing in driving Australia’s property market, Brian Cullen, associate director of property for CrowdProperty Australia, said SME developers continue to be sorely underserviced by traditional lenders.

“The SME developer is unloved in the financial world,” Cullen said. “The transactions they do of one to several million dollars don’t get much attention from the banks.”

A recent landmark survey of Australia’s development community confirms Cullen’s view.

CrowdProperty’s small-scale developer survey uncovered widespread dissatisfaction amongst SME developers with traditional lenders.

The survey found that debt financing remains the single biggest barrier to building more homes, particularly given the cost of property development.

SME developers need certainty of funds to flourish

In order to truly flourish in the Australian property sector and help the country overcome its housing affordability crisis, Cullen believes SME developers need to urgently overcome these financing challenges to avoid project delays impacting overall project success and profitability.

“The numbers and variables are continually moving in the financial model for any project,” Cullen said.

“This includes the interest rates for loans, changes to construction costs, as well as planning changes that can affect your development strategy.”

The ability of SME developers to access funds quickly and with certainty can improve the outcome of their projects and better position them to seize opportunities as they arise, providing a critical edge against competitors.

“Being able to start the project as soon you can is always going to give you the advantage,” Cullen said.

“The estimates you have right now should hopefully remain accurate, and more closely approach the outcome you hope to reach at the end.”

Understanding your lender is essential

To overcome the challenge of access to funds, Cullen believes it’s essential for SME developers to have a deep understanding of how lenders operate and what criteria they use.

“Developers should think like financiers and understand what passes their criteria and what doesn’t,” Cullen said.

“When they’re out there searching for transactions, developers should know all the elements of what ticks the boxes for a financier as intimately as we do.”

This understanding of lenders should also serve as the basis for SME developers in crafting their own business strategies, to improve their own market success in addition to their ability to access finance.

“The capacity for financing should be one of the key aspects that drives and guides your strategy,” Cullen explained.

In addition to approaching lenders with their own project ideas, developers should tap financiers for knowledge on the best opportunities that are most likely to secure funding.

“My view is that developers should come to us and ask what sort of financing they are doing in which areas,” Cullen said.

“They should be asking what types of transactions work and what loan amounts are preferable or problematic, in conjunction with their due diligence on a particular region and development type.”

Live negotiation means better deals

In addition to understanding lenders, SME developers can also benefit from working with finance platforms that are willing to engage in live negotiations with borrowers, where borrowers deal directly with decision makers.

This can expedite the process of deal completion, enabling developers to access funds with greater certainty and speed.

“With live negotiations, the process doesn’t get handed around to different people, so you actually get to complete deals more quickly,” Cullen said.

“If you can close the negotiation faster, it’s a major efficiency gain. You understand the numbers, and you can close out the competition.”

The expertise of financing platforms matters

In order to fully capitalise on the knowledge of lenders and live negotiations, it’s important developers work with specialised finance partners who understand the property market.

As well as providing borrowers with invaluable information on market opportunities, specialised lenders such as CrowdProperty can assess projects with greater certainty and speed than traditional financiers.

“We’re property people doing property lending - that’s our advantage,” Cullen said.

“We’re practical and more nuanced in how we assess the transaction. That allows many borrowers to get in there quickly, doing deals that in many cases might never get off the ground without our services.”

Timely funding translates into long-term success

Beyond individual projects, the ability to access finance swiftly and with certainty can also boost the long-term career trajectories of SME developers.

This is because it increases the number of projects SME developers can complete within a given timeframe, which translates into a major difference for their businesses over the long-term.

“Access to more capital for a greater number of transactions allows developers to build a stronger and larger portfolio,” Cullen said.

“If you can do multiple transactions together you can create what is a real business, instead of just doing deals one-at-a-time on a piece-by-piece basis.”

CrowdProperty provides fast, simple and transparent property project finance for property professionals, learn more.