The Intermediary – March 2026 - Flipbook - Page 60
SPECIALIST FINANCE
Opinion
Lenders back the
developer – not
just the deal
I
magine a world where every
borrower has strong financial
backing, clean credit and a
wealth of relevant experience,
presenting development
projects with 25% profit
margins and flawless title. An
underwriter’s dream.
Anyone working in development
finance knows this is a fantasy,
particularly within specialist lending.
In today’s market, margins are tighter,
build costs stay elevated and regulation
continues to increase.
Even capable developers may have
faced setbacks in the past, yet it is their
resilience and ability to adapt that
keeps schemes progressing.
Tick-box credit decisions rarely
work in this sector. Instead, calculated
risk and a genuinely balanced and
holistic view of both the project
and the developer behind it is what
sustains a healthy and profitable
lending pipeline.
Balancing risk and reward
For a lender, every transaction is a
balance. The aim is simple: fund
schemes that are delivered efficiently,
exited successfully and lead to
repeat business. Long-term funding
relationships reduce uncertainty,
improve execution confidence
and create value for both the lender
and borrower.
The reality is that development is
inherently complex. Legal friction,
contractor performance, cost
movement and market shis are part
of almost every opportunity. Strong
appraisals and detailed planning
drawings provide structure, but they
do not remove uncertainty. Once
construction begins, and oen well
before that point, challenges surface.
Spreadsheets can model risk. They
cannot manage it. Each site carries its
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The Intermediary | March 2026
own variables, and external pressures
evolve constantly. The differentiating
factor is not whether issues arise, but
how effectively they are managed
when they do.
Backing the developer
This is why, in development finance,
lenders are ultimately backing the
individuals as much as – and I’d argue
more than – the deal itself.
Profit on paper is important,
but this is only realised through
execution, having strong gross
development value and a healthy
profit margin provides comfort, yet
they don’t build houses, manage
contractors or project schedules.
People do.
When assessing schemes, lenders
look beyond the appraisal. Track
record is important, but relevance
is much more so. This is about
understanding the breadth of
experience on schemes of similar
scale and complexity, similar local
markets and dealing with the brunt of
development woes.
That said, experience isn’t
just measured purely from the
number of schemes completed.
Some will present with strong
commercial awareness, technical
understanding and clear grasp of
risk. Knowledgeable and competent
applicants, oen from a construction
background and surrounded with
the right team, present a compelling
proposition, even if they are earlier in
their journey.
Equally important is behaviour.
Transparency during due diligence,
realism in forecasting and openness
when challenges arise can all
signal capability.
The question is not whether
problems will occur, but whether
the individual leading the project
WILL CALITO
is head of sales and business
development at Magnet Capital
Spreadsheets can
model risk. They cannot
manage it. Each site
carries its own variables”
has the judgement and composure to
resolve them.
Finally, it’s about skin in the game.
Meaningful equity aligns interest
and proves belief in the scheme.
Developers who are invested both
financially and reputationally tend
to show clearer and more strategic
decision making.
In specialist finance, the deal opens
the conversation. The developer
determines the outcome. In many
cases, it takes a lender that is willing
to support a longer-term vision rather
than focus on a single transaction.
The strongest relationships are
built over multiple schemes, where
understanding a borrower’s wider
business plan provides context beyond
one appraisal. Supporting growth,
structuring funding appropriately
and backing capable sponsors through
distinct stages of their journey is
where real value is created.
Lenders with a partnership
approach sit at the centre of specialist
lending. Collaborating with
developers, not just deals, aligning
with their ambition and supporting
sustainable growth over time.
In development finance, success is
rarely about one scheme. It is about
building momentum, trust and a
history together. ●
