Property investors and developers are losing significant leverage on every deal by sourcing finance manually, according to new research from Brickflow.
The report, titled “The UK’s Most Expensive Mistakes”, analysed 300 simulated finance searches across bridging loans, commercial mortgages and development finance, and compared how different UK lenders responded to identical borrowing scenarios.
The report found there was a £250,000 average net loan difference (on a £1.4m purchase) on bridging loans, a £306,000 average net loan difference (on a £1.5m purchase) on commercial mortgages, and a £842,000 average net loan difference (on a £3.7m project with a £5.2m GDV) on development finance.
On the £3.7m development scenario, the lowest deposit required by any lender was £450,000, while the highest was £1.4m on the same deal. Starting with equal equity of £1.4m, an investor securing the most competitive terms could spread that capital across three projects, while an investor accepting the least competitive would commit all of it to one. Repeated over a career, that is the difference between 30 completed projects and 10.
Ian Humphreys, CEO of Brickflow, said: “Looking at a single lender or a handful of lenders is the industry standard for many borrowers and brokers not using technology. The reality is that this manual approach is costly. Borrowers can tie up hundreds of thousands of pounds in unnecessary equity on every deal by sourcing finance manually.
“If that capital were freed up and reinvested, the additional property transactions completed each year could be substantial. Manual loan sourcing is holding brokers and their clients back. We built Brickflow to help brokers close more deals for their clients, with less capital tied up in each one.”
