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  Posted by: electime      13th January 2023

Close Brothers Property Finance and Travis Perkins plc give developers greater access to building supplies and materials-

Travis Perkins General Merchant, which is part of Travis Perkins plc, and is the UK’s largest distributor of materials to the construction sector, recently launched an escrow agreement with Close Brothers Property Finance to support SME housebuilders.

This game-changing initiative means that SME housebuilders can access building supplies and materials directly without having to face often lengthy, pre-approval checks, tackling one of the major challenges faced by SMEs when setting up SPV’s (special purpose vehicles) on their developments. This significantly reduces the financial risks, increases supply chain stability and time spent managing cash flow for the SME builder.

In practical terms, it means that the housebuilder will give Close Brothers Property Finance consent to pay Travis Perkins plc directly for the materials, which have been identified for the building work and subsequently approved by the monitoring surveyor.

This reduces the risk for lenders and gives the developers access to materials when they need them, freeing up time to focus on other areas of the business.

The account has been piloted by Goldrose Sharpe Developments to help with the development of its nine-unit Lucian House project in Hackney.

Edwin de Silva, Business Development Director at Travis Perkins plc said: “SME housebuilders play a vital role in delivering quality new homes, but while the nation’s biggest property developers have no problems finding funding to support large-scale projects, SME housebuilders do not enjoy the same level of access. This initiative will help level up the playing field.”

Daniel Joyce, Director at Close Brothers Property Finance said:  “This is an innovative but practical product, which helps to tackle a significant and growing barrier to development for SME housebuilders. The largest developers are able to bulk buy on significant credit facilities, making it cheaper and quicker for them to build than SMEs. While SPVs provide a number of advantages, the lack of credit history has long been a thorn in their side, but this new Escrow agreement  eliminates that challenge, allowing SMEs to concentrate on building houses, which is what it’s all about!”

Paresh Chandegra, Director at Goldrose Sharpe Developments said: “This really is a win-win as everyone in the partnership benefits. The materials crisis over the past two years has been a huge challenge, and this initiative allows us to shore up our supply chain while reducing our financial and sourcing costs.”

40 years ago, SME housebuilders were responsible for constructing 40 per cent of new homes in the UK, while today it stands at just 12%. The next decade will feature significant change to the future of housebuilding like never before, with net zero targets and technological innovations but the new escrow account is set to play a vital role in helping SME builders flourish whilst providing a much-needed boost to local economy and supply quality housing to local communities across the UK.

The deal was brokered by Chris Barnett, Travis Perkins plc’s in-house solicitor.