Category: Blog

Whilst we look forward to 2022 filled with the promise of the return to normalcy the year 2021 came with its challenges, even for Santa: elf-labour shortages due to COVID-19, then followed by the global supply chains crisis. Fortunately we were able to assist with a working capital loan. It required a visit to the North Pole in freezing temperatures, a pledge over reindeer and sleighs, and AML onboarding with a long out-of-date passport and no proof of source of funds. We wish all our clients a happy and prosperous 2022!

Fiduciam continues to support small house builders across the United Kingdom with development funding. The latest project to approach completion is a seven-house development in Taplow.

Fiduciam provided a flexible multi-drawdown facility that enabled the borrower to repay early if sales were strong while providing the security of a longer-term loan. The interest rate is a competitive 0.74% per month. Interest was retained for the initial part of the 24-month term.

The scheme has been well received by the market and multiple units are already under offer. Since Fiduciam and the borrower agreed to release amounts in advance, the borrower benefits from the certainty of knowing the proportion of sales proceeds that will be retained by Fiduciam and how much will be available for financing their next projects. Fiduciam expects the first sales to complete within the next two months.

Louisa Willoughby, Case Manager at Fiduciam, comments:
“Over the last year, Fiduciam has expanded its product offering targeted at small housebuilders. We have funded a variety of ground up projects for experienced developers across the United Kingdom, typically between 3 and 12 units. The Taplow project benefits from an excellent location and easy access to Crossrail. Its appeal to young families and commuters is confirmed by the sales already under way.”

Marc Morris, Underwriter at Fiduciam, adds:
“We are keen to develop close long-term relationships with borrowers such as the developer of the Taplow project. While new technological tools and platforms enhance our ability to gather and interpret information, and enable us to mitigate credit risk, they are no replacement for previous collaboration. From the borrower’s perspective, our knowledge of their business allows us to offer better terms that are more tailored to their requirements. For example, we often seek to help repeat borrowers transfer equity from one project to the next and thus accelerate the project cycle. We are also happy to discuss projects at an early stage, and to provide visibility on financing options.”

The UK’s well documented housing shortage, and the efforts made to address it, have not prevented the marked decline of small house builders in recent years. COVID-19 has posed additional challenges, although lenders have been able to assist individual firms with products under the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme.

The market share occupied by small house builders fell from 28% in 2008 to 12% in 2015 [1]. Previous research from the NHBC Foundation lists (a) the planning process, (b) the availability and cost of land and (c) the availability of finance as the main factors inhibiting growth [2]. 

Since 2015 Fiduciam has endeavoured to provide relationship-based project financing for a range of SMEs, including house builders. We have sought to assist developers grow by offering flexible finance solutions that help accelerate their project cycle through the transfer of equity from one project to the next.

The typical Fiduciam house builder is developing three to ten units. We like to see a track record of completed previous projects and a willingness to engage with a lender. Works are funded through drawdowns approved by the appointed project monitor. Loan terms are generally 18 to 24 months for ground up projects and a little less for other schemes.

COVID-19 has impacted house builders in a variety of ways. We have seen borrowers affected by closed sites, limits to the number of workers on site, the reduced availability and higher cost of materials, and planning and utility connection delays. These construction delays, accompanied by the impact of social distancing restrictions on viewings, have prompted cash flow headaches and the risk of development loans running overtime.

Fiduciam has provided fresh funding to developers throughout the COVID-19 pandemic, including facilities under the Coronavirus Business Interruption Loan Scheme. This scheme seeks to assist SMEs with their additional liquidity requirements prompted by the disruption. Fiduciam has utilised the scheme to help provide individual house builders with the time and resources they require to finish existing projects and confidence to start works on new sites. The full impact of COVID-19, and support schemes such as CBILS, on house builders and housing supply will not be known for some time.

Fiduciam has been accredited by the British Business Bank to offer loans under CBILS. Delivered through British Business Bank accredited lenders, CBILS is designed to support the continued provision of finance to UK smaller businesses during the Covid-19 outbreak. The scheme enables lenders to provide facilities of up to £5m to smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cashflow.

References:

[1] Department for Communities and Local Government (2017). Fixing our broken housing market.

[2] NHBC Foundation (2017). Small house builders and developers.

Fiduciam, the institutionally funded short-term lender to SMEs and entrepreneurs, has just completed a £1.18million loan to finance a popular hotel in Cornwall.  The loan which falls under the Coronavirus Business Interruption Loan Scheme (CBILS), will enable the hotel to continue operating and investing until the end of 2022.

2020 has been a year of contrasts at Hustyns Hotel and Spa in Wadebridge. After closing for three months during the lockdown, it reopened in July to experience its highest demand for rooms in recent years, only to be affected once more by this second national lockdown.

Fiduciam’s loan provides Hustyns Hotel and Spa with secure commercial funding for 24 months. Financing costs have been reduced thanks to the Coronavirus Business Interruption Loan Scheme, and the absence of early repayment charges gives the borrower added flexibility.

Ravi Gupta of Hustyns Hotel and Spa, comments, “Covid-19 has posed unique challenges to the hospitality industry – it’s been a real year of volatility. 2020 was expected to be a significant year as we had invested in the hotel with a refurbished restaurant and a new ‘glamping’ offering coming on stream.

“We know that we have a good business model and strong demand, but after strong revenue and profit growth in 2019, the lockdown meant we experienced a difficult spring and early summer 2020 when we couldn’t let out rooms or lodges. Once the lockdown was lifted, we had to immediately scale up operations and staff levels for full occupancy. The loan from Fiduciam means that we cannot only weather this latest lockdown, but we can make the investments we want into our resort and know that our business’s future is secure for the next two years.”

Marc Morris, Underwriter at Fiduciam, says, “Hustyns is the perfect fit for our Coronavirus Business Interruption Loan Scheme offering. Pre-COVID the hotel was performing well. The CBILS loan provides 12 months of space for Hustyns to maintain resilience and rebuild its accounts before the borrower returns to servicing interest. In the medium term, the borrower plans to refinance onto a term product.”

Fiduciam has been accredited by the British Business Bank to offer loans under the Coronavirus Business Interruption Loan Scheme. Delivered through British Business Bank accredited lenders, CBILS is designed to support the continued provision of finance to UK smaller businesses during the Covid-19 outbreak. The scheme enables lenders to provide facilities of up to £5m to smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cashflow. All economic downturns cause significant economic scarring in addition to any structural change. Short-term liquidity problems faced by even the best placed firms can quickly become solvency concerns, particularly as the result of an asymmetric shock such as a pandemic. Within this setting, Fiduciam continues to see pro-active businesses seek robust provision for their liquidity requirements over a 12 to 24-month time horizon.