Not only has the reputation of the sector improved immeasurably from the dark days when it was viewed as a loan of last resort, but there has been a significant increase in the number of lenders and products on offer.
This is a tremendous development for brokers and their clients when the case is straightforward; there is no shortage of lenders keen to take on vanilla deals.
But intermediaries are only too aware that plenty of the borrowers that come to them for bridging don’t have simple requirements. Instead, many of these clients and their cases are deemed complex, whether that’s because of the size of the loan, the plans for the property being borrowed against, or some other factor.
And it’s with these cases that brokers face far slimmer pickings.
A question of expertise
The truth is that many lenders are reticent about lending against these deals even in ordinary circumstances, because they recognise that they don’t have the sort of experience or level of understanding to do so confidently.
But there are lenders in the market that do have that expertise, and which have invested in building back office teams and supporting professionals with the skills and knowledge required in order to handle these cases.
I have been in the bridging industry for a long time and LendInvest boasts more than a decade’s experience in the sector. And that history is vital ? it means that we have seen a variety of weird and wonderful cases, deals that others might baulk at, but which we know can be a great success.
There is more to being a lender than simply saying whether we can fund a deal or not. It takes true know-how to grasp some of these esoteric cases, to understand the borrower and what they are trying to achieve.
For example, let’s say a borrower is looking at a significant site which they plan to carve up for different types of usage ? some commercial, some residential. It’s the sort of case that may make some lenders wary, but by digging into what the borrower has done previously, and getting under the bonnet of the deal, you can build a much bigger picture of precisely what is involved and whether it’s worthwhile.
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Of course, being able to do that comprehensively requires far more than simply hiring a few business development managers and underwriters who remember what the market was like 10 or 15 years ago.
This is another area that LendInvest has devoted a lot of time and energy towards: building those business resources to cover everything from lawyers and IT experts, to an in-house quantity surveyor.
Brokers realise very quickly whether a case is going to a vanilla one that they can place almost anywhere, or whether it will take a more specialist approach.
But, importantly, even though these aren’t deals that every lender will handle, there are still experienced operators who truly understand the market and can run the rule over the case and potentially lend against it.
Where is the money coming from?
When it comes to complex cases, there are other factors that need to come into play beyond the lender’s experience and appetite. Brokers also need to think carefully about precisely where the money is going to come from.
Advisers have seen first-hand that when uncertainty hits, some lenders find they are unable to deliver on the promises they have previously made and are forced to bring down the shutters. This is particularly likely when lenders are relying on a limited funding model, with just one or two lines of credit.
Understanding the risk of this happening has been a big factor in LendInvest building one of the most diverse funding models in the bridging market, encompassing lines from banking giants, retail bonds, securitisations and our investor platform.
It means that we can offer terms with the confidence that we’ll be able to honour them – as we have done through this turbulent period – and that when we need to fund a deal, there are plenty of different sources we can turn to.
Brokers have long memories. They know the lenders that have delivered on their promises, and which have left them scrabbling around at the last moment for replacement finance. It’s those lenders that have built sturdy funding models and which don’t leave intermediaries in the lurch, that will win the favour and repeat business from advisers.