Chris Baguley:
Filling the void

Developers are a smart bunch. One of the things I love about developers in our region is that they are always quick to spot an opportunity. Despite the turmoil in the credit crunch, developers are taking leaner times on the chin and are already preparing for an upturn.

Developers are using short-term finance to complete their own projects, acquire rivals and secure new sites as traditional funding sources dry up.

Short-term lending is a booming sector worth around £2bn a year and much of it is fuelled by property developers. The outlook for gross advances is expected to see rapid growth from £2.5bn in 2005 to £5.6bn by 2010 and the North West will be responsible for a good deal of that growth.

We've lent over £60m in the last 12 months and had more referrals last month than at any other point in our history from our contacts at law firms and accountancy firms in the region. We've seen an increase of 70% in deal proposals to around 20 a week. I'm being presented with deals that the banks are turning away but because we can be more flexible on our repayment terms we are able to offer funding and help bring deals to fruition despite the slowdown in the market.

The key thing here is that entrepreneurial developers are using the slowdown to their advantage by offering immediate cash deals for sites and half-finished developments to secure substantial discounts. The value of the short-term loan has also shot up from an average of around £200,000 to around £375,000 and we are seeing a trend of developers in the region looking to buy half completed sites or even companies who are struggling in the sector. Buying up smaller stricken rivals is an emerging trend and developers are using short-term loans to get the funding for these types of deals. My view is we can expect these deals to flourish during the next six months.

Chris Baguley is managing director of Bridging Finance, a Manchester-based lender.