31 Mar 2022

Insider coverage – How LDS Sales Guarantees empower SMEs to build more new homes

LDS Sales Guarantee piece covered in North West Business Insider‘s April edition. The article highlights the importance of supporting SME housebuilders to tackle decades of housing undersupply.

LDS was launched with a clear purpose: to empower SME housebuilders to build more homes, more quickly.

In 1988, SMEs delivered 39% of all new homes in England. By 2020, this had dropped to just 10% – a fall of 74%.

One of the key barriers to SMEs building more is the availability of sufficient funding for their development projects. According to a recent House of Lords report from the Government’s Built Environment Committee, increasing access to finance for SMEs is a “crucial element in meeting housing demand”.

That’s why the LDS Sales Guarantee was created. It provides assurance that LDS will acquire any unsold homes on a site and releases a 10% cash deposit, unsecured and at zero coupon, towards project development costs.

This powerful combination has led to LDS Sales Guarantees being embraced across the market.

Development lenders benefit from a guaranteed exit from sites, which improves their risk profile and allows them to lend more to both new and existing SME clients. In turn, better access to lending and the LDS cash deposit release allows SMEs to spread their equity further, bringing forward more new projects and new homes than would otherwise be possible.

Finally, brokers can improve conversion rates and increase fees by presenting their SME clients with a higher leveraged, lower risk and smoothly executed finance package which combines development finance and a Sales Guarantee.

Last year, LDS launched its online proptech engine. This easy-to-use tool enables developers, lenders, and brokers to create a Sales Guarantee proposal in under 2 minutes. It has led to a rapid increase in Sales Guarantee proposals issued, including one which transformed the viability of a site in Ramsbottom, enabling an SME to develop 16 new homes with a £6m Gross Development Value.

The market has embraced Sales Guarantees, leading to significant and sustained growth at LDS. To meet demand, ten new roles have been created and the North West headquarters are expanding to bigger offices.

Ben Jenkinson, former head of development finance products at Homes England, has also joined LDS as Regional Director for London and the South, opening a new office at the Shard Quarter, London Bridge.

LDS has a mission to empower SMEs with the resources of larger national housebuilders to help build a broader base of housing supply. To this end, LDS is currently developing LDS Boost, a free, interactive online platform providing access to knowledge, a network of useful contacts, and tools to maximise efficiency and profits.

Independent analysis by Savills and Chris Walker, former Treasury economist and MHCLG Senior Economic Advisor, found that Sales Guarantees could help restore SME housebuilding to historic levels, bringing forward up to 55,000 additional new homes and supporting nearly 200,000 jobs in the construction industry.

LDS is continuing to develop its Sales Guarantee to maximise impact, and in transforming the financial viability of development projects, is empowering SMEs, lenders and brokers to help solve the housing crisis.

Click here for North West Business Insider’s full April edition.

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