Product Innovation in Specialist Lending: How Are Lenders Standing Out?

Competition in specialist real estate finance has traditionally centred around a familiar set of factors: price, leverage, speed and certainty of execution.

All four still matter. But as competition for good borrowers increases, there is another area where lenders are finding ways to stand apart: product design.

From revolving credit facilities to part-build development finance and more flexible development exit products, we're seeing lenders think differently about how capital is structured around the borrower.

It raises an interesting question.

Are we moving towards a market where the product itself becomes as important as the price?

 

Moving Beyond Rate and Leverage

There is only so far lenders can go when competing purely on headline pricing.

The same applies to leverage. Being prepared to lend more can help win transactions, but continually stretching credit parameters isn't necessarily a sustainable way to differentiate.

Product flexibility creates another option.

Recent Bank of England research into specialist lenders provides an interesting example of this. Looking at UK mortgage lending to real estate investors following the increase in interest rates, it's researchers found evidence of specialist lenders adjusting product design to target particular borrower types.

Rather than expecting every borrower to fit neatly into a predefined lending product, lenders can look at how experienced developers and investors actually use their capital.

A borrower completing several acquisitions throughout the year has very different requirements from someone financing a single development.

A developer halfway through construction has a different problem from someone acquiring a site.

And a completed scheme waiting for sales requires a different solution again.

The more varied those requirements become, the harder it is for a standard product to solve every problem.

That's where specialist lending has an opportunity.

 

Revolving Facilities and the Value of Repeat Borrowers

Revolving credit facilities are a good example of product design responding to how borrowers actually operate.

For an experienced investor or developer regularly acquiring assets, arranging an entirely new facility for every transaction can create unnecessary friction.

An agreed funding line can give them greater certainty around available capital and potentially allow them to move faster when the right opportunity appears.

We're already seeing this type of flexibility across the wider lending market. OakNorth's business lending proposition, for example, includes bespoke facilities and revolving credit structures designed around more complex financing requirements.

There is an obvious attraction for the lender too.

Instead of competing for one transaction at a time, the relationship can extend across multiple deals.

The conversation starts to move away from:

"Can you fund this deal?"

towards:

"Can you support our wider pipeline?"

That is a very different relationship.

For lenders looking to build longer-term relationships with experienced repeat borrowers, the ability to support the wider strategy rather than simply the immediate transaction can become a genuine competitive advantage.

 

Part-Build Finance Is Solving a Different Problem

Part-build development finance addresses a very different requirement.

Anyone working in development finance knows projects don't always follow the original plan.

Costs change. Timelines move. Facilities reach maturity. The relationship with an incumbent lender can change. Sometimes the original capital structure simply stops working for the remaining stages of the development.

Historically, stepping into a project halfway through construction hasn't always been straightforward.

A new lender needs to understand:

• What has already been built.
• How much remains to be spent.
• Whether the remaining cost plan is realistic.
• Progress against the original programme.
• The current and projected value of the scheme.
• How the development will ultimately be completed and exited.

None of that complexity has disappeared.

What has changed is that parts of the specialist lending market are becoming more willing to assess these situations and structure facilities around them.

For capable developers with fundamentally viable schemes, that can provide another source of liquidity when the original funding journey hasn't gone to plan.

 

The Lines Between Lending Products Are Blurring

We're also seeing the traditional boundaries between bridging, development and term finance become less rigid.

On paper, the distinctions are fairly simple.

Bridging funds one requirement. Development finance takes care of the build. Once the asset is completed and stabilised, longer-term finance takes over.

Real transactions don't always work like that.

A borrower could acquire an asset, undertake refurbishment or development works, complete the scheme and then require additional time to sell, refinance or stabilise it.

The underlying asset might be the same throughout that journey, but its funding requirements can change several times.

That creates an interesting opportunity for lenders.

Innovation doesn't necessarily mean creating another standalone product. Sometimes it's about making the transition between existing products easier.

If a lender can support more of the borrower journey without forcing them to refinance every time the nature of the project changes, that's a meaningful proposition.

 

Development Exit Is Part of the Same Conversation

Development exit finance demonstrates the same principle.

Practical completion doesn't always mean the developer is ready to repay their facility immediately.

Units might still need to be sold. A commercial scheme may require tenants. An investment property could need time to stabilise before moving onto longer-term debt.

At that point, the development facility that made perfect sense during construction may no longer be the most appropriate or economical form of capital.

Development exit gives the borrower another option.

Shawbrook's development exit proposition is one example of how lenders are approaching this stage of the lifecycle, offering short-term funding for completed or near-completed developments and allowing developers more time to sell units or release capital for their next opportunity.

But again, the differentiator isn't simply whether a lender has a development exit product on its website.

It's whether they understand where the borrower is in the project's lifecycle and can structure the facility accordingly.

 

Is Flexibility Becoming the Real Product?

This is perhaps the most interesting part of the shift.

For sophisticated borrowers, the cheapest facility isn't automatically the best facility.

Of course, pricing matters. So does leverage.

But borrowers are also considering:

• How quickly can the lender make a decision?
• How certain is the funding?
• How flexible are the drawdowns?
• Can the lender support the next transaction too?
• Can the facility adapt if the business plan changes?
• Does the lender understand a more complicated situation?

That changes what we mean when we talk about a competitive lending product.

The product isn't simply the interest rate and maximum LTV printed on a term sheet.

Increasingly, the product is the entire funding experience.

 

What Does This Mean for Lenders?

As competition for good borrowers continues, lenders need a clear reason for those borrowers to choose them.

Some will compete aggressively on price. Others will offer higher leverage. Some will build their reputation around speed and certainty.

But there is another route: build products around problems borrowers genuinely need solved.

That could mean:

• Revolving facilities for repeat developers and investors.
• Part-build funding for viable projects already underway.
• Smoother transitions from development into exit finance.
• Flexible structures that don't fit neatly into traditional definitions of bridging, development or investment lending.

The strongest product innovation probably won't come from taking an existing facility and giving it a new name.

It will come from identifying where borrowers experience friction and finding a commercially sensible way to remove it.

 

What Does Product Innovation Mean for Hiring?

There is also a people element to all of this.

A lender can have an innovative product on paper, but somebody still has to originate it, assess it, structure it and manage it.

As products become more flexible, the people behind them need a broader understanding of the transaction.

An originator needs to understand enough about credit to recognise which opportunities genuinely fit. Credit and underwriting teams need the commercial awareness to assess transactions that might not follow the standard template. Portfolio teams need to understand how the facility is supposed to work as the underlying project develops.

That makes experience across origination, credit, underwriting, product and portfolio management increasingly valuable.

The lenders that stand out won't necessarily be those with the longest product list. They'll be the ones with people who understand why those products exist and when to use them.

 

Key Takeaways

• Price, leverage, speed and certainty remain important, but product design is becoming another way for lenders to differentiate.
• Revolving facilities can help lenders develop deeper relationships with experienced repeat borrowers.
• Part-build finance is creating options for viable developments that need capital midway through a project.
• The boundaries between bridging, development, exit and term finance are becoming less rigid.
• Flexibility throughout a transaction can be just as valuable to a borrower as headline pricing.
• Product innovation works best when it solves a genuine point of friction rather than simply repackaging an existing facility.
• More flexible products also increase the importance of having experienced people across origination, credit, underwriting and portfolio management.

 

Frequently Asked Questions

What is product innovation in specialist lending?

Product innovation in specialist lending means developing or adapting funding structures around specific borrower requirements. This can include revolving facilities, part-build development finance, development exit products and structures that support borrowers across different stages of a project.

Why is flexibility becoming more important in specialist lending?

Borrowers don't always follow a straightforward funding journey. Acquisitions, developments, refinancing and exits can change as a project progresses. Greater flexibility allows lenders to respond to those changes rather than forcing every transaction into a standard product.

How can specialist lenders differentiate themselves?

Price and leverage are still important, but lenders can also differentiate through speed, certainty, service, product flexibility and their ability to understand more complex borrower requirements. Ultimately, the strongest proposition is one that solves a problem for the borrower.

 

Building the Teams Behind Specialist Lending Innovation

Product innovation isn't just about the facility. It's about having people who understand the borrower, the underlying risk and how to turn a good idea into a commercially viable lending product.

At Fintelligent, we work with specialist lenders across real estate and commercial finance, helping them identify the people they need across origination, credit, underwriting, portfolio management and leadership.

If you're developing your lending proposition or building the team behind your next stage of growth:

speak to Fintelligent.