The Intermediary – September 2026 - Flipbook - Page 64
SPECIALIST FINANCE
Opinion
Is lending
keeping pace?
A
development
shouldn’t be harder
to finance simply
because it’s being
built differently.
Yet that can be the
challenge for developers embracing
modern methods of construction
(MMCs), where traditional funding
models aren’t always designed around
how these projects are delivered.
A viable MMC project can have
a very different construction
programme, procurement strategy
and cashflow profile. If the funding
structure doesn’t recognise those
differences, finance itself can become
an unnecessary obstacle.
More than modular
MMC is oen associated with fully
modular homes constructed in
factories and assembled on site.
In reality, it encompasses a much
broader range of approaches,
including volumetric modular
construction, panelised systems
such as timber or light-gauge steel
frames, structural insulated panels
(SIPs), insulated concrete formwork
(ICF), hybrid construction, and
other pre-manufactured elements.
These approaches vary, but oen
involve greater use of manufactured
components, standardised processes
or construction in controlled
environments.
For the right project, MMCs can
shorten construction programmes,
reduce exposure to weather-related
delays and support greater consistency
and quality control. It can also enable
more efficient use of materials and
labour – particularly valuable when
developers continue to face pressure
on build costs and skills availability.
But MMC isn’t automatically lower
risk. It can require earlier design
decisions and closer coordination
between the developer, design team
and manufacturer. The construction
system, warranties, manufacturer,
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The Intermediary | September 2026
logistics and installation all need to be
properly understood.
STEVE SMITH
is head of sales
at CrowdProperty
Fit the build
Traditional development lending is
structured around progress on site.
Work is completed, a monitoring
surveyor assesses that progress,
and funds are drawn down as the
development moves forward. MMC
can change that sequence, pushing
more expenditure towards the front of
the programme.
If significant components are
being manufactured off-site, for
example, the manufacturer may
require payment before they reach
the development. The value is being
created, but isn’t yet visible on-site.
A lender that will only recognise
materials once they arrive can create
a funding gap, leaving the developer
to finance a substantial part of
the manufacturing process. That
doesn’t necessarily require lenders
to take more risk. It requires them to
understand the process and associated
risks, and structure the finance
accordingly.
One way we can accommodate this
at CrowdProperty is through vesting
arrangements. Where appropriate,
drawdowns can be made against
qualifying components manufactured
or held off-site. A vesting certificate
can establish that ownership of
specified materials has transferred to
the developer while they remain offsite awaiting delivery.
The materials must be clearly
identified, with appropriate
arrangements around ownership,
storage and insurance. Structured
correctly, this allows funding to beer
reflect how an MMC development is
being delivered.
For brokers, an MMC case shouldn’t
simply be categorised as non-standard
construction. Understanding how the
project will be delivered is much more
useful. What system is being used?
Who is manufacturing it and what
is their track record and financial
standing? What experience does
the developer and project team have
with the method? What warranties
and certification are available? Will
the completed properties be readily
mortgageable and insurable? When
does the manufacturer need to be
paid? And will the proposed lender
fund those payments when the
developer needs to make them?
These conversations are worth
having early. A lender may be
comfortable with the completed
asset, but have a funding process that
doesn’t work with the developer’s
procurement strategy.
Equally, being comfortable funding
off-site manufacture shouldn’t mean
overlooking the quality of the system,
supply chain or planned exit.
Understand the method
The answer isn’t for lenders to relax
their credit standards. There are
genuine risks, just as with traditional
construction. The key is to have the
property and construction expertise
required to understand those risks.
At CrowdProperty, we’re
comfortable considering
developments using MMCs because
we look at the project, developer,
construction method and funding
requirements together. That
includes understanding when capital
needs to be deployed, rather than
simply whether the work is already
visible on site.
MMC won’t be the answer for
every project. But where it is
appropriate, the availability of finance
shouldn’t be determined by whether
the construction method fits a
conventional template. If construction
continues to evolve, finance must
evolve with it. ●
