Close Brothers Property Finance and Barwood Capital have partnered to provide what they argue is a new development finance model aimed at supporting SME housebuilders.

The approach, which combines senior debt from Close Brothers with equity funding from Barwood Capital, is designed to mitigate risk for both parties while increasing access to finance for smaller developers.

With high interest rates continuing to challenge the sector, the model offers SME housebuilders a route to acquire more sites and deliver more homes. It has already been implemented across more than 20 sites, funding the development of 230 homes with a total gross development value (GDV) of £130 million.

SUPPORTING HOUSING DELIVERY

One of the latest projects to utilise the funding model is a development by Hurst & Hurst Estates in the New Forest National Park. The scheme, with a GDV of £13.5 million, will deliver 46 energy-efficient homes on a six-acre site, half of which will be designated as affordable housing.

Barwood Capital is also working with Surrey-based housebuilder Kidbrook Homes on a luxury apartment scheme in Kingston Hill overlooking Richmond Park (main picture), with Close Brothers providing funding. Kidbrook was the first SME to partner with Barwood Capital through this model, and a recent acquisition in Godalming marks the eleventh development they have undertaken together.

Equity and finance remain significant barriers to SME housebuilders, with 27% of smaller developers citing access to development finance as a major challenge. By addressing this issue, the partnership between Close Brothers and Barwood Capital aims to increase housing delivery at a time when supply remains historically low.

Simon Davey, business development director at Close Brothers Property Finance, said: “SMEs are known for delivering high-quality, sustainable homes that create significant economic benefits for local communities by leveraging local supply chains and apprentices.

“By partnering with Barwood Capital to create this new lending model, we’re able to provide SME housebuilders with access to both senior debt and equity whilst diversifying risk and removing key barriers to development opportunities – all at a time when the housing shortage remains acute.”

Steve Chambers, director and head of residential at Barwood Capital, added: “Our tried and tested funding model with Close Brothers will expedite our existing developer partnerships and generate new ones, which will only bolster the UK’s requirement for new homes.”