The Intermediary – February 2026 - Flipbook - Page 17
SPECIALIST FINANCE
In focus
proceed without the lengthy delays
that housebuilders currently have
to endure in a volatile planning
process, where more oen than
not, applications have to go through
unnecessary appeal processes to
gain approval.
However, it could also present
somewhat of a double-edged sword
for SMEs: on one hand, streamlined
processes and Permission in Principle
(PIP) for medium sites of between
one and 49 homes could open doors
to projects previously considered
too complex and time consuming to
navigate through planning, but on
the other hand, it means developers
will need to adapt quickly to new
viability rules and environmental
compliance, under the Planning and
Infrastructure Act.
Those that invest in planning
expertise early on, and maintain
strong relationships with local
authorities, will be best placed to
navigate new opportunities and
capitalise on these opportunities.
Sustainability issues
In the world of sustainability, the
Future Homes Standard (FHS) is
likely to become mandatory by the
end of the year, requiring a 75% to
80% reduction in carbon emissions
for new homes. What does this mean?
Gas boilers are out, whilst heat pumps
and low-carbon systems are in. While
this aligns with the UK’s net zero
ambitions, the impact for SMEs is
increased build costs and additional
technical skills to implement.
Elsewhere, the Building Safety
Act continues to tighten compliance
with the introduction of the Building
Safety Levy in October, which is
set to apply to developments of 10
or more units. For smaller players,
these changes mean higher upfront
costs and more complex project
management. Developers that stand to
gain the most will be those that invest
in building the safest and most energy
efficient homes, marketing these as
selling points.
in planning expertise
Cost pressures
early on [...] will be best
Outside of bricks and mortar, several
financial policy changes will impact
SME developers’ boom line. Late
payment reform will introduce
statutory caps on payment terms
and mandatory interest on overdue
invoices. Whilst this will be a positive
move for cashflow – and something
which Paragon welcomed – it will
demand robust invoicing systems.
Making Tax Digital for Income
Tax also goes live for those earning
over £50,000, adding further
administrative burden. Labour costs
are rising too, with the National
Living Wage jumping to £12.71 per
hour in April. All this, combined
with changes to capital allowances
and tighter margins, means SMEs
will need to plan meticulously to
maintain profitability.
While these legislative changes
aim to level the playing field for
housebuilders to speed up delivery
and improve living standards,
smaller players will be faced with new
challenges that require preparation.
The good news is that with the
right foresight and finance, SMEs
have the chance to capitalise on
these changes and turn them into
genuine opportunities.
Lender support
In the face of all this change, lenders
have a critical role to play for
developers – as partners in problemsolving. Access to flexible funding
will be essential for time-poor SMEs
facing higher build costs, additional
administrative complexities and
longer lead times.
Products such as development
finance with staged drawdowns,
Those that invest
placed to navigate new
opportunities”
revolving credit facilities and green
finance options for sustainable
projects can be the difference that
ensures delivery. Beyond funding –
and this is where specialist lenders
like Paragon come into their own lenders can also add value by sharing
advice and insights.
What can SME developers do now
to get ahead? First things first, invest
time to research and engage with
local authorities to understand the
implications of planning reform and
sustainability standards. Strengthen
financial planning by factoring
in wage increases, compliance
costs and tax changes and increase
contingency in budgets.
Crucially, leverage partnerships by
working with knowledgeable lenders
that offer tailored products and sector
expertise, and seek advice alongside
funding. This is where working with
mid-tier lenders like Paragon, our
hands on, partnership-led approach,
can make all the difference.
Each client we work with is a
partner we aim to work with longterm, not a transaction. Finally,
embrace sustainability by investing
in green building and using it as
an opportunity to differentiate
yourselves from other players in a
competitive market.
This year will test the agility of
SME housebuilders. Those who adapt
quickly, plan strategically and partner
wisely stand to gain the most. ●
February 2026 | The Intermediary
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