Travis Perkins General Merchant has launched an escrow agreement with Close Brothers Property Finance to grant SME housebuilders access to building supplies and materials directly without having to face pre-approval checks.
The initiative tackles one of the major challenges faced by SMEs when setting up special purpose vehicles (SPVs) on their developments as well as significantly reducing the financial risks, time spent managing cash flow and also increasing supply chain stability.
In practical terms, it means that the housebuilder will give Close Brothers Property Finance consent to pay Travis Perkins plc directly for the materials, which have been identified for the building work and subsequently approved by the monitoring surveyor.
This reduces the risk for lenders and gives the developers access to materials when they need them, freeing up time 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.
Edwin de Silva, business development director at Travis Perkins, 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.”
Daniel Joyce, director at Close Brothers Property Finance, said: “This is an innovative but practical product, which helps to tackle a significant and growing barrier to development for SME housebuilders. The largest developers can 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.”
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.”
