Sometimes The Banks And Main Lenders Are Not To Blame - Your Project Just Might Not Be Very Good.

It seems a common reaction, when someone is turned down for funding

, to say that "the banks are to blame". I also hear "how are we going to get out of recession if you can't borrow money to build?" After all a significant indicator for the economy as a whole is that state of the building industry.

Not too long ago lenders of all types were being criticised for "throwing money" at consumers when they shouldn't have been, making bad lending decisions and even reckless lending practices. Now, and it is no secret, the high street lenders have really tightened up on their criteria and the cry from the industry is that lenders are not doing enough. Suddenly they are wrong for not lending where a few years ago they were castigated, in hindsight, for doing just that.

To cut to the chase, if a project is good it will get funding. Now, this might not mean that you can turn up to a high street lender and secure a rate of a few per cent above base. It might mean you have to go off the high street and talk to the specialist lenders that are in the sector to get your funding. Yes, it will be more expensive and No, you won't want to pay so much but a deal is a deal and it allows you to get on with what you do best.

This brings us on to the comments. We see some projects that have come around once, twice or even more. Lender after lender is declining the enquiry so the client either alone or with a broker moves on to the next. As I have alluded to in the past, giving up is not a plan for success, that said if all the lenders are all saying "no" then you have to at least consider that maybe the project is not as good as you think.

"They can't all be wrong"

Some schemes just don't make sense; lenders and the better brokers will see that and will not take a development on their books. The problem is that at times some developers cannot see it. They might be emotionally involved in the site and certainly have some financial investment in it. With these factors and more working it can be difficult to see the real and clear situation. We have seen enquiries, for example, to build a block of flats in an area which has numerous flats for sale already. This could be that flats are in demand but it will also certainly make the chances of quick sales at high prices much less. All lenders have to work on a worst case scenario - what if the project goes wrong, how are they going to get their money back?

There is another phrase, "horses for courses". So, one lender says no is not an indicator that it is time to throw in the towel and walk away. Certain lenders, for whatever reason, just will not consider certain schemes are certain areas. This is not to say the project is a bad one, just that lenders prefer some sites over others. If you have spoken to ten lenders from high streets, to large specialists to small "boutique" firms then maybe the scheme just isn't solid and should be put on the back burner for now.

The state of the housing market is also a major factor. We all know that houses are not selling as fast as they did up to mid 2007 and that mortgages are not as freely available as they were, though indications are things are getting better, overall.

If you suddenly do find someone giving you a glowing report, great news for you where all else are saying no, and "oh and could you pay a fee upfront", then you should also take time to consider the next move. It is unfortunate that some brokers will indeed take up front fees with no real idea of knowing if a deal can be funded, some are brazen enough to take fees knowing full well the deal will no be lent into. The same also goes if you have been quoted similar rates from various sources then you are quoted something much cheaper - don't be fooled, some will tell you what they think you want to hear.

Conditions are still tough throughout the economy and the construction industry continues to suffer as much as any other, if not more. Options are available to

by: Kenneth Harland

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