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 Alternative Lenders Come Up Trumps, As Banks Struggle To Meet New Funding Demands


It’s more challenging than ever before for property companies and developers to secure bank loans. The pandemic has put an enormous strain on the economy, and high street banks simply can’t keep up to provide funding or a timely service to customers. 

For example, tenants’ rent withholdings have had significant impacts on landlords. These delinquent payments, in turn, have caused missed loan repayments to lenders, who cannot allow borrowers to delay payments 

indefinitely. Since borrowers are having trouble making payments month after month (with no exact foreseeable recovery date), we are seeing the beginnings of significant lending market changes, which will greatly impact UK landlords. 

Unfortunately, these problems are snowballing into credit crunches for responsible commercial property owners and developers too. Although UK-regulated banks – who lend the most money to property companies – are in much better shape than they were after the 2008 financial crisis, they’re losing patience. In fact, so far in 2021 alone, we have seen a reduction in new loans to UK property owners and developers by 34% year-on-year. And, it is unlikely that this alarming trend will change any time soon, as the economic downturn is, ever so clearly, not under control. 

Banks Are Changing How They Do Business with Property Lenders 

So far, banks have been willing to work with property borrowers. However, with access to capital being a significant driver of growth for investors and developers, any reduction in lending has market-wide consequences, which threaten to further reduce property prices. 

Banks are becoming more impatient due to the pandemic. Instead of making new loans and providing timely service to commercial borrowers, they are instead considering how to recover from significant commercial property losses. They have gone into self-preservation mode, to survive a period where defaults are looming, and things will get worse. Soon, we will see more actions against borrowers – who the banks believe could be long-term losses including a greater focus on restructuring, foreclosures, and equity injections (rather than providing new loans to companies that are weathering the downturn). Granted; responsible property developers and companies cannot always expect help from banks, so, what other options are available? 

How Can Property Investors and Developers Borrow Funds in 2021?

Property finance firms and other alternative lenders can creatively finance commercial real estate deals, even during times of economic challenge. 

Astute Capital is one such firm that issues bonds listed on the Frankfurt Stock Exchange and provides a range of loans to UK property companies.

Unlike banks, alternative lenders are often more able to create bespoke packages for those looking for imminent funding.

Banks or Alternative Lenders? 

In conclusion, traditional property lenders successfully offered short-term solutions for pandemic and downturn relief. Unfortunately, as the pandemic causes long-term problems for delinquent lenders, they are forced to make changes to reduce damage from credit defaults. This means structuring and regulating existing accounts, rather than providing new loans to responsible commercial lenders. 

If your property investing or developing company needs access to funds, consider looking at alternative lenders instead.


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