Broker outlines how pragmatic bridging and development funding is helping schemes that fall outside mainstream bank appetite
SME and mid-sized property developers are increasingly looking to specialist lenders to fund their move into larger schemes, as traditional banks maintain tighter risk appetites and rigid processes.
For Luke Egan (pictured top), director of bridging and development at Truffle Specialist Finance, a key shift over the past one to two years has been the growing importance of genuinely specialist funders in bridging and development – and the brokers who can navigate that market.
He said that while there are “some great options out there for developers to scale”, the challenge often lies in how those options are accessed and structured.
“Using the wrong people or only speaking with a fraction of the market through someone that perhaps only uses a handful of lenders is where limitations can occur and potentially less than ideal terms,” Egan said.
Pragmatic lenders and the limits of automation
According to Egan, the lenders making the most headway in this space are those prepared to exercise judgement rather than rely solely on automated decisioning.
“I think bridging and development lenders that are truly pragmatic and flexible in their approach – and I appreciate it can be difficult to be both at times – will make the most progress, moving away from the ‘computer says no’ attitude that is still the case with some banks,” he said.
“Automation is great and plays a huge role in the future of specialist finance, but sometimes you need someone who is approachable and open to conversation.”
That emphasis on pragmatism reflects a broader trend: while mainstream banks continue to prioritise standardised criteria and systems, many SME developers present more complex projects, layered capital stacks and evolving exit routes. For those cases, relationship-based underwriting and a willingness to engage with the nuances of a scheme can be decisive.
Exit strategies under the microscope
Exit planning remains central to any bridging or development facility. For Egan, this is not an emerging concept but a discipline that should already be firmly embedded in broker practice.
“This should be nothing new to any broker or packager,” he said. “The exit needs to be well researched and thought out prior to entertaining an application as otherwise you are simply creating problems for your future self and more importantly the client. The lender will always require absolute transparency and a plan B to be thorough.”
Lenders, he noted, are looking for evidence that sales, refinancing or asset disposals have been properly modelled and stress-tested. Weak or vague exit assumptions, even where the underlying scheme appears strong, are likely to limit appetite or drive more conservative terms.
Managing LTV pressures with new products
Egan identified loan-to-value as one of the key pressure points when structuring more bespoke facilities for scaling developers. As build costs, finance costs and margin expectations all compete, aligning borrower ambitions with lender risk constraints can be difficult.
“The main struggle is usually around LTV but we see innovative ways lenders are trying to bridge this gap, we have several lenders with high LTV and low rate products to help these situations,” he said.
Such offerings have the potential to support developers who have strong projects and track records but lack sufficient equity to meet stricter mainstream criteria. However, they also increase the importance of robust underwriting, clear covenants and appropriate security to protect lenders at higher leverage levels.
Preparing SME developers to move up a gear
For smaller developers aiming to move from modest schemes to larger, more complex projects, preparation is critical before approaching a broker or lender.
“The easiest way is to make sure your numbers are well thought out and not built on sand,” Egan said. “They are going to be scrutinised so they need to stand up or you are just wasting your time. Of course, brokers can help with this to try and get the project off the ground.”
That scrutiny spans build costs, contingencies, sales values, timelines and professional fees, as well as the borrower’s existing commitments. From a broker’s perspective, incomplete or optimistic assumptions can jeopardise lender confidence early in the process.
Bridging on track to become mainstream
Looking ahead, Egan expects bridging in particular to move further into the mainstream of UK property finance, supported by better information and guidance for both developers and intermediaries.
“I believe that in a few years, bridging in particular will become a mainstream product and will be considered by a much wider audience as access to information and guidance becomes even more readily available,” he said.
For mortgage and finance professionals, this points to a market where specialist bridging and development solutions are no longer niche tools but core components of a wider funding toolkit – provided exits are credible, leverage is controlled and the right lenders are brought to the table.
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