One-Stop Isn’t a Cliché – It’s a Value Proposition

Paul Oberschneider is the Founder and CEO of Hilltop Credit Partners. In this article, he discusses the advantages of one-stop funding.

Anyone who’s been on the development journey knows that the finance side is complicated. They quite possibly have the scars to prove it.

Alternative lenders have been quick to fill the gap left by traditional lenders withdrawing from the development finance market since the GFC. There are now more approaches to funding than ever before, which can be bewildering for local SME developers who’d been more accustomed to the simplicity of borrowing from the bank.

Financial, technical and research expertise is needed these days in addition to just understanding the development process, in order to get the delicate matter of funding right.

One-stop funding brings all of the above together to simplify the process for smaller developers without the financial expertise and brings additional benefits with it.

Partnership

The traditional capital stack involves multiple lenders. Having multiple lenders means fragmented responsibility – each being responsible for just one aspect of the funding and only caring about their own returns. They’re insulated from wider project issues provided they get their money (and returns) back.

One-stop funding assumes the risk of multiple lenders all at once. It becomes truly invested in the project’s success as it has way more to lose. This equates to a funding partner – financial expertise that works throughout the development lifecycle to resolve any issues that may arise, to make sure the deal is always as strong as it can be. This can be a real boon for smaller developers.

Risk Tolerance

Higher LTV financing is not always easy to secure for SMEs. As per above, one-stop funding by its very nature is designed to assume greater risk. It comes from a greater understanding of – and appetite for – risk. It broadens access to finance for SME developers, as well as opens the door to building bigger projects and building a greater number of them.

Flexibility

Traditional funding approval follows rigid assessment, meaning small but strong developments can slip through the cracks if they don’t tick all the right boxes. One-stop funding looks at the nuances of individual projects and assesses them on their own merits. It requires deeper analysis that can be unpalatable to the traditional model, consequently offering greater flexibility across terms, pricing and funds – meaning a greater likelihood of a facility that meets the developer’s needs. Every scheme is different – every funding package needs to be too.

Agility

The more entities involved in the capital stack, the longer the process takes – meaning potentially months of meetings, negotiations and paperwork. Worse still, there’s the ever-present threat of the whole thing falling over should any one party pull out – straight back to the drawing board!

One-stop funding delivers the entire capital stack – one lender, one set of documentation, surveys and valuations. Zero intercreditor agreements. We’re talking weeks instead of months to get the deal done.

Cost

In a similar vein, multiple lenders can negatively impact the bottom line. In a competitive market, you’d expect using individual lenders for each part of the capital stack to drive down rates. Whilst that’s certainly a possibility, in reality piecing together funding from multiple lenders entails multiple sets of fees which can not only affect the developer’s ability to scale their business, but also carries an opportunity cost – time spent negotiating intercreditor agreements is time lost servicing other potential deals. The one-stop model can prove to be more cost-effective.

One-stop finance is about structuring a competitively priced alternative to the traditional capital stack. It’s about delivering success in the simplest way for developer, broker and lender alike rather than just closing a deal for the sake of it.