Webinar wrap-up: Alternative finance

Despite the continuing pandemic, there’s still a real appetite for new development projects.

Recent analysis indicates things are set to stay this way for a while:

• House prices rise – up 5.3% from March-December 2020
• Missed housing targets – more areas desperate for new houses
• Changes to permitted development rights –  more scope for converting to resi

The increased demand means there are a lot of developers looking for funding for projects. 

That's why we spoke to Property Elevator's Helen Chorley and Head of LandFund, Oliver Symons, in our recent webinar to discuss crowdfunding and other alternative finance options.

What is crowdfunding?

Alternative finance can be any form of "non-traditional lending", such as peer-to-peer lending, crowdfunding and blend networks.

Crowdfunding helps developers to promote specific projects through a public platform, reaching a wide range of investors. 

"Rather than there being an investor and a developer, there might be 30 or 40 or even more investors"- Helen

When Covid hit, some traditional lenders didn't have the liquidity in the market to finance developments. So, many developers had to turn to crowdfunding, with appetite changing almost overnight.

What are the benefits of alternative finance?

More flexibility

Helen believes that crowdfunding offers developers more freedom. Similarly, investors can judge crowdfunded projects more holistically too, rather than defaulting to the tick-box risk exercise of traditional lending.

"Each deal is evaluated on its own merits with crowdfunding."- Helen

Raising your profile

For a long time, crowdfunding has been misrepresented as a last-minute resort for developers when, in actual fact, crowdfunding can be a great way to raise your public profile.

“I see a good few developers who crowdfund very, very regularly. I look at them and think that they’re forward-thinking, innovative, they’re able to raise finance.”- Oliver

More security

With so many investors involved in the crowdfunding process, there is a rigorous due diligence process. And with increasing FCA regulation, developers and investors get an added level of reassurance. 

“The relevant security is offered, which obviously the investor benefits from and is a real appeal for me.”- Helen 

Simpler communications with investors

Most crowdfunding platforms facilitate monthly updates from developers, but it’s still important that as the developer you’re providing the right amount of detail on the project’s progress. 

“Getting that communication right across all of those people can be challenging. But, generally the platform will help with that.”- Helen

How to find the right crowdfunding platform

For both investors and developers, finding the right crowdfunding platform is key. And not just the platform, but the team behind the platform. 

You need to pick a team you can work well with and who offer sufficient support, particularly when it comes to communication.

As with traditional lending, there’s a whole host of questions you should be asking to make sure it’s the right option for you, such as: 

• What’s the reputation of the platform?
• What’s their success rate? 
• How flexible are their terms? 

The answer to these questions will help you build a picture of whether the platform will be a good fit for your needs. 

The future is bright for alternative finance

Both Helen and Oliver agreed, that based on current growth trends, the future of alternative finance is looking very good.

The growing traction of alternative finance is likely to drive competition in the lending space. This will ultimately lead to lower prices and higher quality service, making alternative finance a great option for a lot of developers.

However, it’s worth noting that crowdfunding is not for everyone and requires a certain type of personality. Namely, a willingness to carry out your development journey on a public stage and have your successes and failures laid out for all to see. 

But, as an increasing number of developers are deciding that now is the right time to give alternative finance a try, it’s definitely something to watch. 

Want to know more about alternative finance? Watch the on-demand webinar

You can watch the full discussion with Helen and Oliver on the video below. So grab a coffee and a notepad, and see all the insights they had to share: