How overdraft facilities can relieve developers’ cash flow issues

Property development has many moving parts and adeptly managing all these variables is vital to the success (i.e. profit) of any project. From a financial point of view, cashflow management is paramount, especially during economic downturns when uncertainties loom large. For example, it may well take longer than in previous years to sell new properties and if developers need to sell completed projects to finance ongoing or new ones, they will need strategies to manage cashflow and project funding effectively.

Development Finance

Development finance provides vital funding to those building new housing but in such challenging times, such traditional financing options may not be enough to address the fluid cash needs inherent to development projects.

This is where the strategic use of overdraft facilities can be a game-changer, offering developers flexibility and agility in managing their financial affairs.

Unlike conventional term loans that disburse a lump sum upfront, revolving credit facilities provide developers with the freedom to draw funds as and when required, subsequently repaying and redrawing as circumstances dictate. This inherent flexibility can serve as a lifeline for developers facing cashflow restrictions, enabling them to successful navigate short-term liquidity gaps.

In addition, the revolving nature of these facilities can prove more in tune with the variable nature of cashflows in the development sphere. Whether it’s covering expenses while awaiting receivables or making the most of chance opportunities by swiftly accessing capital, overdraft facilities offer developers a robust financial safety net.

A critical advantage of overdraft facilities lies in their cost-effectiveness. Interest accrues solely on the portion of the credit facility that is being used, therefore sparing developers from unnecessary financial cost when funds remain idle. This will appeal to developers who spend each and every day looking at ways of both optimising the use of their resources and maximising the profitability of a project.

Furthermore, overdraft facilities help developers to speed up the start of a new project by mitigating delays associated with securing necessary materials and resources. By leveraging these facilities, developers can promptly access capital at the onset of a project, circumventing supply chain bottlenecks and inflation-induced price hikes. Consequently, projects stay on track within predefined budgets, which is music to the ears of developers who might well otherwise be struggling to maintain the financial viability of the project.

Alternative Overdraft Facility

At Alternative Bridging Corporation we developed the Alternative Overdraft product to provide a revolving credit facility ranging from £250,000 to £3 million, secured against residential or commercial properties.

Unlike conventional loan processes which can take time, drawing funds from the Alternative Overdraft is swift and hassle-free, enabling developers to act without delay.

Of course, the use of overdraft facilities can improve developers’ creditworthiness, instilling confidence in suppliers and stakeholders alike. By demonstrating access to reliable funding sources, developers bolster their reputation and foster stronger business relationships, further improving future growth prospects.

Overdraft facilities can provide financial resilience and agility for property developers. Through astute use of revolving credit mechanisms such as the Alternative Overdraft, developers can strengthen their financial foundations, overcome cashflow challenges, and drive their projects towards success despite challenging economic conditions.

Jonathan Rubins is director at Alternative Bridging Corporation