Michael’s Top 10 Tips for Raising Finance

1. Know Yourself, Your Goals and Your Aspirations

This is a big one and I have put this one first for a reason. Knowing yourself is very important when raising finance. Why are you in property? Why are you doing this deal? What are your goals and aspirations? If you know the answer to these, then you know what you need to look for in your finance.

You may want to raise just equity, or you may just want to raise debt. Having a deeper understanding of yourself, allows you to make more informed decisions moving forward

Knowing your goals and aspirations allows you to make decisions when looking at schemes as to whether they fit in with your long-term vision.

Property is about thinking for the long term rather than the short term, so get as clear as possible on the long term as quickly as possible. This will also assist you when looking for investors, as it will help to align the synergies between you.

2. Be Prepared

Be prepared for raising finance. Create yourself a Dropbox file or a Google Drive Folder that you can share with your Broker. You want to include the following in this file:-

1. Proof of Address (utility bills etc)

2. Certified ID (Driving License/Passport)

3. Personal Bank Statements (last 3 months)

4. Business Bank Statements (last 3 months)

5. Business Accounts (N/A for SPVs)

6. SA302s if you are self employed

7. An up to date portfolio schedule (showing property value/mortgage outstanding and rental income)

Make sure that these documents are kept up to date and that they are ready to go across to the Broker/Lender as quickly as possible.

Also, make sure that you have information to hand around your project. Lenders will want to see Cashflows, Appraisals and details of the scheme/purchase. Having these to hand will show a knowledge of the project as well as helping things to move quickly

Every property/scheme that you offer on should have a folder on your computer with all the documents relating to it. I would also recommend creating a pack for each one showing the following:-

1. Details of the Property

2. The Numbers

3. A section around the location of the property and the local area

4. A section about you and your experience in property 

5. A section on your team

3. Professional Team

Make sure you have your team in place ready to do deals!

This is not an exhaustive list, but make sure you have the following:-

- Lawyer

- Planning Consultant

- Commercial Finance Broker

- Main Contractor

- Project Manager

- Quantity Surveyor

- Architect

- Accountant

- Insurance Broker

- Mentors

This team will allow you to push forward and do more deals than you could do on your own. Also, Lenders are now becoming more interested in the team that you have around you, and they are starting to accept their experience as a backup to your experience.

Development Lenders are especially starting to accept Borrowers who may not have experience but have a good team around them. This is case by case and may not work for everyone, but having a top team around you allows you to increase the odds of raising finance.

4. Know your Numbers

I am shocked by the number of Developers and Investors who come to me looking for finance, who do not know their numbers inside and out. When going for commercial finance, you should know your numbers inside and out, you should be aware of how much the build is going to cost you, and the profit you are expecting.

If you do not know your numbers, then the Lender will never have confidence in you. When you have confidence in your numbers, the Lender will have confidence!

More and more Development Lenders are now going down the route of having their own in-house Quantity Surveyor, so that they now have the ability, in-house, to analyse your build costs with a fine-tooth comb! So, it is more important than ever to make sure that your numbers are accurate, as you will get found out if you are fudging numbers!

Speaking to a Builder early on will allow you to get a handle on build costs, and similarly, speaking to an Estate Agent early on will also allow you to get a handle on the sale values.

5. Know your Finances

You need to know your own finances! You need to know what you can afford and what you have access to!

I get more and more deals now where Clients think they have access to more cash than they do, and this can cause huge issues when they realise there is a shortfall in funds. You also need to know what you have access to on a monthly basis, as you may need to pay interest monthly, and this needs to be affordable.

If you have a good handle on your own finances, then it is easier for the Broker/Lender to work with you to get the right finance in place. You need to make this as easy as possible for them!

6. Don’t Rush

There is no need to rush into a financing product. Analyse your options and make sure you go for what is best for you.

People often rush into the first product presented to them because they are under pressure from the Vendor. This can lead to higher rates, higher arrangement fees and maybe a lack of knowledge on the exit of the product.

Just take your time, analyse the options and make a decision based on what is best for you and not the Vendor!

7. Use a Good Broker

A good Broker can make all the difference to a project. You need to make sure that they know what they are doing and that they are raising the correct finance for you.

A good Broker should do the following:-

1. They should analyse your deal and make sure the numbers stack

2. They should be sending the deal to Lenders that are going to both deliver, but also deliver at the cheapest rates

3. They should not be led by the biggest commissions! 

4. They should keep you informed throughout

5. They should explain the options and also the exit (you do not want to be stuck on expensive finance, unable to exit!)

6. They should make you fully aware of fees that they are charging and disclose if they are paying those fees away to referrers etc. 

7. They should be there to answer any questions that you have, and have an understanding of property themselves

Finding a good Broker can be hard, but I would also recommend going with recommendations from other people, who have actually used that Broker.

8. Know your exit

Again, this is one of the most important things. Make sure that you understand your exit and how you are going to redeem the finance. If you are taking a Bridging Loan or Development Loan, then you need to make sure that understand how you are going to come off of the product. Are you going to sell? Are you going to refinance? If you are going to refinance, can you refinance? Is the affordability ok?

A good Broker should go through these options with you, and it is always good to have your exits lined up before you even go for the initial finance. It is far too dangerous to be stuck on an expensive bridging product that you cannot exit, either because the units are not selling, or the refinance is not possible.

Get educated early on your exit!

9. Learn to walk away

This is the hardest thing to do. As Developers and Investors, we get attached to deals on a personal level. I have done this on a number of occasions personally, and it has cost me a lot of money! I got far too personally connected to a Development site that did not stack and wasted thousands in legal fees, just because I wanted it to work.

You need to learn to walk away. Especially if your Broker or the Lender is telling you that the deal does not stack. Don’t waste time working on the deals that don’t stack, spend your time finding the deals that do!

Also, don’t be afraid to walk away from a deal if you cannot raise the finance. I find that even after I tell Clients that a deal cannot get finance, they still string the Vendor along and the Estate Agent, just because they are too worried to pull out of the deal and risk their reputation.

I can assure you now, pulling out of a deal quickly is better than dragging it on 3 months and then pulling out when everyone has spent money and time on the deal. Agents appreciate quick honesty, and they are not going to punish you for pulling out of a deal if it does not stack. There is a reason it doesn’t stack.

10. Build Relationships

Property is a business that relies fully on relationships!

You build relationships with your team, with Investors and with Lenders. These relationships make a huge difference when raising finance. Each time you work with a Lender, it becomes easier and cheaper, each time you work with an investor it becomes easier and as you work with your team, you learn more about one another and it all becomes quicker

Relationships make the world go round, and building them with the right people can make all the difference