This presents a challenge for brokers. Not only do you have to help your clients to navigate the changing environment and make the right decisions for their circumstances, but you also need to choose lenders that you can be sure will remain committed to the market throughout the uncertainty and be able to fulfil on their agreements.
For those lenders in this market that are not banks, the strength of funding lines is critical and could make the difference between a straightforward completion and a very disappointed client.
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So, once you find a lender that can deliver the solution your client wants, how can you have confidence the deal will complete, even if the economic conditions take a turn for the worse?
Here are three questions you should be asking every non-bank lender before you submit an application on behalf of your client:
- Do you rely on a funding line from a third party?
Many lenders in this sector rely on third-party funding, and this isn’t necessarily a bad thing, but if your lender does, you may want to ask whether the funding line is soon scheduled for renewal. Also, check whether the lender has more than one funding line, with different institutions and renewal dates, to ensure continuity of service. At Castle Trust, we fund our own loans with fortress bonds, which are investment products backed by the Financial Services Compensation Scheme.
- Do you have committed backers?
At Castle Trust, we share the same commitment to the market as our shareholder JC Flowers & Co, giving us a unique confidence in its continued support. Knowing that a lender has support from an established shareholder, which is not liable to retreat from the market or withdraw its support, is reassuring for both the broker and the client, so it’s important to check who is behind your chosen lenders.
- Do you have experience of lending throughout different economic cycles?
This applies to both institutional experience and the experience of individuals within the organisation. Lending in a stable environment is easy. The art is in continuing to provide consistent lending decisions when the landscape becomes more challenging and previous experience can be helpful.