The changing investment landscape: secure financial planning for developers

Steep inflation, rising material prices, supply chain issues and new legal requirements all pose serious challenges for property developers and construction firms. But securing finance for their projects remains their biggest concern, writes Sarah Geiger of Alasco.

The mid-year 2022 UK Commercial Real Estate Lending report confirmed an increase in investment activities up until June 2022. Since then, deal flow has started to slow down dramatically. As interest rates rise, successful real estate funding gets more and more difficult for developers.

In the current market where risk factors are more and more difficult to model, two questions arise. How do developers ensure the financial stability of their projects? And where lie the biggest challenges and opportunities when it comes to secure financial planning for property developers?

Financial stability in a shaken market: challenges and opportunities for property developers

Challenge 1: data & documentation

Making the right decisions during the planning and development process has the potential to cut project costs by 20%. This makes it all the more important to use empirical data throughout the project. The earlier data is harvested and structured, the earlier it can be used as a guiding benchmark. Consistent grouping and proper structure and analysis forms make project information comparable. For example, you can reliably define income milestones based on data from previous projects, which helps with accuracy in liquidity planning.

Challenge 2: real-time liquidity planning

Ideally, you’ll carry out liquidity planning in real-time by directly comparing cash inflow and outflow. That’s where having a transparent overview of all a project’s financial transactions, including payment status, contract volumes, and amounts paid out, can help to secure liquidity. Excel spreadsheets simply can’t provide this type of comprehensive overview in a format that’s easy to digest, and because they are so prone to error, there’s a high risk that they will actually hinder financial planning.

Challenge 3: reporting

Financing a project involves many stakeholders. To build trust with those stakeholders, demonstrate your legitimacy, and prove your eligibility for credit, you must be able to produce customised reporting tailored to their respective needs and priorities. Only when your data is 100% accurate, can you rely on the reports you share with banks and investors, even if one makes an ad-hoc request and you have to generate that report under pressure. The more comprehensive your reports are, the easier it will be to secure financial support from those funders on future projects, too.

Increase the security and transparency of your financing process

This leads us to understand where the opportunities for property developers lie in the coming months:

• Using cross-project benchmarking to maximise profit and minimise risk
• Carrying out liquidity planning in real-time
• Boosting credibility with detailed and tailored reporting

Especially when it comes to acquiring, tracking and grouping your project data, modern, digital tools like Alasco help you build a strong database to stand out in the investment landscape.

The desire to have less complexity over the course of the project and sales process, secured funding and predictable revenue streams is strong. To find a solution to the challenges, we’ve analysed the factors that have the greatest influence on a successful financing process.

In this free checklist, we look at six factors that will increase the security and transparency of your financing process, providing you with a greater understanding of how uncertainties and risks can be reduced to a minimum.

• Sarah Geiger is director of UK at Alasco