Underwriting Your Professional Team: A Best Practice Approach

 

Qandor member and CEO & co-founder of Hilltop Credit Partners, Paul Oberschneider talks about how to underwrite the best team for securing funding.

It’s often overlooked, but it’s a crucial step for developers seeking financing – you must underwrite your professional team. This is vital from a project delivery perspective because you need people with the experience and balance sheet to execute your plans.

It’s also vital from a financing perspective. Funders need confidence in your team; they look at expertise and track record when they consider your deal memo.

Follow these 5 steps to conduct effective due diligence, so you can present a more compelling business case to funders and speed up their decision-making process.

 

1.     Validate the team’s experience and expertise

Start by reviewing the company’s website and social media. Then take a deeper look at their experience and track record – the company itself and the individual directors. This means investigating:

·       How long they’ve been in business

·       What sites they’ve been involved in

·       How successful past projects have been

I also recommend getting honest references from past clients. Discuss the company’s approach and ability to stay on time and within budget and how they addressed any issues that arose during the project.

 

2.     Ensure they can take on a project of your size

Your professional team needs to be able to work efficiently. This means you need confidence in their capacity and that working on your project won’t mean they’re spread too thinly. Make sure:

·       Team size is in line with your project scale

·       Professional indemnity coverage is far beyond what you need

·       Collateral warranties give you adequate coverage

 

3.     Check for red flags

Look up the company and the directors on Companies House and in other public information sources. This will help you spot risks affecting their ability to see your project through. Red flags include:

·       Frequent turnover of directors over the years

·       Past liquidations

·       Pending litigation

 

4.     Have a panel of professionals for each category

Funders want to see that you’re in a position to mobilise quickly and then deliver the project on time. It’s therefore a good idea to present 3 or 4 options for your key partners, such as the architect, project manager, QS, main contractor and subcontractors with design input.

Having a panel of professionals for each category shows the funder that, when you get the green light, you won’t be delayed if your top choice is tied up. It also demonstrates you have back-ups in place should something happen during the project.

 

5.     Include a dedicated professional team section in your deal memo

Your deal memo should have an entire section focusing on your professional team, summarising the information above. It should cover how long each company has been in business, their experience and why they’re suitable for the project. You should also discuss your relationship with each one, including any past projects you’ve worked on together. After all, property development isn’t a transactional business – relationships are intrinsic to success.

team-3373638_1920.jpg

 This process will help you secure funding faster

Your funder will need all this information before they sign off on a deal. Even if you received an indicative term sheet hours after providing a rough project appraisal, you could still be waiting months for approval if they’re not confident in your professional team.

These 5 steps can take several hours to carry out, but they can save you months of frustrating back-and-forth during the financing decision-making process.

 

 

To know more about becoming a Qandor member, book a call on this link.