Considering your Cashflow

One of the biggest factors in ensuring that your project reaches a successful completion is to have a strong finance plan in place. Unfortunately, if you run out of money, your project will grind to a halt and inevitability you will start to incur more and more costs.

Cashflow is a critical point which in our experience developers put second to programme (the developer’s timescale and scheduling of completing trade works). Whilst programme is important, understanding the cashflow requirements throughout the project can be critical to delivering the underlying programme. Cashflow is king.

Let’s consider what a lender looks for in the process:

When acting as Project Monitor for Lenders, our role is to understand and advise on the associated project risks. Lenders are looking to understand a range of points including (but not limited to):

  • How is the project set up generally? Is the scheme viable, is the proposed procurement route appropriate and, are the correct documents in place and in a suitable format?
  • Who is the project team and what experience do they have? Are all of the required consultants engaged to date?
  • What are the development costs? Lenders will need to consider all costs including those paid to date, what the costs are to complete and whether appropriate allocations have been made for all of the costs? In addition, it is important to consider whether the developer has a suitable contingency pot and how it is calculated (does it indicate an appropriate allowance for the project risks)?
  • What are the construction related costs and are these suitable to current market rates?
  • What are the statutory requirements? What planning permission is in place and what conditions are attached? Are there any wider statutory requirements such as CIL or Section 106 obligations?
  • Are the right insurances in place at a suitable level?
  • Have the relevant reports and surveys been undertaken?
  • What is the programme to deliver the scheme and is it suitable?

Generally, the above, amongst other factors serves to provide the Lender with a calculated assessment of the associated risks. In addition, they encourage the developer to consider actions which need to be taken to reduce those risks. Although the points that a Lender looks at are likely to seem like factors for the distant future, an experienced developer will understand that these are the types of points that should be considered early on in the process to ensure a smooth exit.

A point we always repeat to developers when acting as Project Monitor is that by ensuring all of the relevant items are in place, the benefits are first and foremost vast and, in the developers, interests. They will only be beneficial to the lender should the unfortunate circumstances arise where they need to step-in.


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