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< 
div>So we bid farewell to Cheval Bridging Finance – or at least Cheval in the form the industry has known for the best part of two decades.
A sad day in particular for the erstwhile lender’s employees, brokers and associates, and for bridging in general. But if a business with the reputation of Cheval can fail, what does it tell us about the state and health of the short term lending sector?
Cheval was a well-organised, well-regarded lender. As a direct competitor of Omni Capital – and a close geographic neighbour in our part of Watford – we had a great deal of respect for the quality of its staff and product offering. The fact it was one of the earliest bridging lenders to achieve full FSA-regulated status simply served to underpin the firm’s credentials.
What appears to have gone wrong was not a failure of Cheval’s internal systems or external processes but an unwillingness, or inability, on the part of its principal funder to continue supporting the business. There were doubtless good commercial reasons behind this decision, but if it can happen once it can happen again.
Bridging has boomed largely as a consequence of the retreat of mainstream lending. Cash-rich funders – whether private or foreign banks, wealthy individuals or syndicates – have sniffed out an opportunity to make rich returns at relatively low risk. But the question remains as to the reliability of these sources of much-needed liquidity.
At a bank level, many of the providers of funding are themselves part of larger banking conglomerates. While the subsidiary bank may understand the nuances and attractiveness of the risk-reward component in bridging, the boardroom big-wigs are less likely to do so. With financial and regulatory pressures continuing to be exerted on their core banking operations, the need to redirect scarce capital can leave bridging lenders high-and-dry.
Among the syndicates and private backers, bridging will only continue to enjoy current levels of support so long as the returns remain attractive and relatively secure. Should investors become nervous about how their money is being used, or a more tempting investment opportunity emerges, we could see further examples of funding peremptorily withdrawn. This is a daunting prospect as we teeter on the brink of a New Year and possible triple-dip recession in the UK.
I would guess that the majority of recognised bridging lenders are confident with their funding arrangements. Many enjoy long-standing support from funders of various stripe, while others will doubtless look for new lines and fresh commitment in the coming months. Some, like Omni, enjoy the benefit of guaranteed proprietary funding. All good, but let’s not be complacent: I didn’t see the Cheval news coming; did you?
On a more cheery note, I have high hopes and great expectations for 2013. I believe it’s going to be an exciting, high-octane year for bridging. Fantastic opportunities (cliché insert moment) will be balanced by serious challenges. But as a lender and a salesman, there’s no other mast to which I’d choose to pin my colours.
This is my final blog of the year. I wish you all a very Merry Christmas and a prosperous, healthy New Year. See you in January.
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