Why Pluto Finance is focusing on SME developers

“The bulk of our track record on lending is in the UK, and the average value of one of those homes is slightly under £300,000. These are mid-market homes for ordinary people, which is what the UK is so tremendously short of,” he says.

Pluto Finance lends to different types of developers, including housing associations. But borrowers are overwhelmingly SMEs – the very group many say has been squeezed hardest in recent years. SME builders developed just 10% of new homes in 2020, down sharply from 39% in 1988, according to Savills.

“They used to be the backbone of UK housing delivery,” Mr Faiz says. “But they’ve had a variety of issues, one of which is access to finance.” And that, he believes, is where Pluto can make the greatest difference.

“We’re not a bank, but borrowers see us as they would see a bank,” he explains. “We provide broadly similar terms – but we’re more flexible. We can often lend a little more, and be cheaper and quicker.”

Why SMEs matter more than ever

Pluto believes it understands how to price and manage development risk where banks increasingly do not.

“We’ve developed an expert team – 30 people only doing this,” Mr Faiz says. “We’ve done over £4bn worth of lending and we know how to underwrite that risk.”

Yet he is clear about the challenges.

“At the top of my risk register are the headwinds facing SME house builders,” he says. “It is tough times for them... they need all of the policy support they can get.”

Society benefits when they are supported, he argues, through better design, more thoughtful schemes and regeneration of places others overlook.

Pluto Finance is not regulated as a bank and cannot take deposits, but instead manages long-term funding from some of the world’s largest institutional investors, including big names such as Blackstone, and pension and insurance companies. It is part-owned by the Universities Superannuation Scheme and also has Treasury backing.

In January, Blackstone Real Estate Debt Strategies and Pluto Finance’s European mid-market lending partnership announced that it had completed its debut transaction. This was to provide a £30m loan to N&W Capital to buy its first residential investment in Ireland.

Pluto Finance typically has between 70 and 80 live loans at any given time and has built what Mr Faiz describes as a uniquely comprehensive footprint for a non-bank lender.

“We’ve built out a team that covers the whole of the UK,” he says. “We’ve got lending directors in Scotland, Wales, the North, South West and South East – every region is covered.”

Despite subdued market conditions, Mr Faiz reports resilience. “Houses and apartments we have financed are selling broadly at the paces and levels we expect,” he says.

“That reflects our focus on projects where we know demand is strong.” Around 65% of Pluto’s lending is to repeat borrowers, something he sees as a strong credit indicator.

Currently, about 65% of Pluto’s portfolio supports homes for sale and 35% for rent. Of the properties, 60% are apartments – mostly low rise – and the rest are houses.