Travis Perkins has recently launched an escrow agreement with Close Brothers Property Finance to give greater support to SME housebuilders.
The “game-changing initiative” is designed to ensure that such developers can access building supplies and materials directly without having to face often lengthy, pre-approval checks, tackling what the merchant says is one of the major challenges faced by SMEs when setting up SPVs (special purpose vehicles) on their developments.
Said to significantly reduce the financial risks and time spent managing cash flow for the SME builder whilst increasing supply chain stability, in practical terms, it means that the housebuilder will give Close Brothers consent to pay Travis Perkins plc directly for the relevant materials, thereby reducing the risk for lenders and freeing up time for the developer to focus on other areas of the business.
The account has been piloted by Goldrose Sharpe Developments to help with the development of its nine-unit Lucian House project in Hackney.
40 years ago, SME housebuilders were responsible for constructing 40% of new homes in the UK, while today it stands at just 12%. And Travis Perkins contends that the next decade will feature significant change to the future of housebuilding like never before, with net zero targets and technological innovations. Acoordingly, it argues that “the new escrow account is set to play a vital role in helping SME builders flourish whilst providing a much-needed boost to local economy and supply quality housing to local communities across the UK.”
Edwin de Silva, Business Development Director at Travis Perkins plc said: “SME housebuilders play a vital role in delivering quality new homes, but while the nation’s biggest property developers have no problems finding funding to support large-scale projects, SME housebuilders do not enjoy the same level of access. This initiative will help level up the playing field.”
Paresh Chandegra, Director at Goldrose Sharpe Developments, added: “This really is a win-win as everyone in the partnership benefits. The materials crisis over the past two years has been a huge challenge, and this initiative allows us to shore up our supply chain while reducing our financial and sourcing costs.”
Daniel Joyce, Director at Close Brothers Property Finance commented: “This is an innovative but practical product, which helps to tackle a significant and growing barrier to development for SME housebuilders. The largest developers are able to bulk buy on significant credit facilities, making it cheaper and quicker for them to build than SMEs. While SPVs provide a number of advantages, the lack of credit history has long been a thorn in their side, but this new Escrow agreement eliminates that challenge, allowing SMEs to concentrate on building houses, which is what it’s all about!”
