Has bridging moved on?
By Claudine Reynolds, Business Development Manager, Roma Finance
Be honest, what’s the first thing that comes to mind when someone mentions bridging finance?
Someone asked this question recently and the response has been heard time and time again…. ‘It’s scary. There is no transparency and the interest is high….. isn’t it?’
As a bridging finance lender, we’re up against this all the time.
How do we start to change mindsets?
How do we show that bridging finance can be a valid option for customers where there is a need for short term lending getting them from A (purchase) to B (long term goal)?
There are external challenges too, the housing market is slower but still steady, there’s a lot of uncertainty about where property values will be in 12 months’ time, however, as the saying goes, with uncertainty and volatility there is always opportunity.
Specifically, it means that good, experienced people are able to buy better.
Vendors are beginning to be more realistic and it’s giving customers a window of opportunity to buy property at better prices. This offers them more scope to increase the value of those properties. This market favours individuals who know how to buy well, because it means they can sell well.
Those customers who buy well, can use bridging finance to fund their purchases, with lenders providing funding towards the purchase as well as the required works needed. This then gives the customers the ability to exit quickly and enables them to use their cash for other projects. This is where bridging finance comes into its own.
However, with hundreds of bridging lenders in the market place, how do you go about narrowing down your search to ensure you’re supporting your customer with the best lender?
- Do your detective work - Research your lender, especially if it’s the first time you’re recommending them. Don’t be afraid to ask lenders directly about what happens if something goes wrong.
- Ask for recommendations - Real-life recommendations from other brokers are worth their weight in gold when it comes to choosing a bridging lender, so communicate with your industry peers.
- Look at the leadership - Understand who is running the lender. For example, have they got a background in lending, property development, managing hedge funds or maybe something else?
- How are they funded? - If you choose a lender with multiple funding lines from institutionalised banks and building societies, you have more confidence their funding is secure.
- How fast can they give you certainty of offer? - Speed is really important to borrowers, look for lenders that are upfront about their current turnaround times (SLAs) and have processes in place to give you certainty of offer as quickly as possible.
- Membership of a professional body - Is the lender a member of a trade association? Look for membership of the Association of Short Term Lenders (ASTL) or lender partnership of the National Association of Commercial Finance Brokers (NACFB) or Financial Intermediary & Broker Association (FIBA) and membership of the Lending Standards Board (LSB).
- How good is their service? - Good service is hard to judge before you’ve actually worked with a lender. But feeling valued from the outset is a good start. Are the phones being picked up quickly by knowledgeable experts and do you feel like an individual, not just a case number? Having a dedicated point of contact who knows the case is important too, as it frees up your time to get on with helping customers.
- Bespoke underwriting and structuring on complex cases - If your customer’s case is complicated you want a lender with experience in structuring loans to meet the needs of the project, not just offering an off-the-peg solution.
- A focus on exit strategy - The best bridging lenders look for a clear and realistic exit strategy before approving a loan. Start with the end in mind.
- Clear, fair and transparent fees - Look for lenders that are upfront about all fees, including those charged if your customer cannot redeem in full and on time.
So how do we as a lender start to change mindsets about bridging funding?
Using thought leadership is our preferred way, writing articles and blogs that help and provide useful information as well as attending events in person to talk about the benefits of bridging finance.
Next time you’re at an Legal & General event, make sure to find out how bridging finance can work for your customers who buy well. Ask us if bridging has moved on... we think so.
For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.