Brokers want trust and delivery from new bridging lenders, not 'silly rates'

On 20th September, Bridging & Commercial and PMJ Capital teamed up to host a virtual roundtable on how to know whether a bridging lender can deliver on its promises.

B&C was joined by PMJ Capital’s director Stuart Stead and managing director David Rainford, 2XL Commercial Finance director Nina Scott, Focus Commercial’s head of real estate John McNamara, Adapt Finance consultant Mark McBriar, and Aureum Finance’s commercial finance specialist Bridget Kibiru, to discuss what questions should always be asked when it comes to working with new and existing bridging lenders and how funding lines are impacting the way in which finance providers lend and make decisions.

The panellists began by pointing out that while it’s great to have more choice from a growing number of finance providers, it’s all about whether they can deliver, and if it’s worth the risk for a broker to potentially damage their reputation if promises aren’t kept.   

“The number of lenders coming to market is worrying,” cautioned Mark. He explained that it is pushing money into the space in an unsustainable and unprofitable way. “The only time we look at new lenders is when there’s a person we have a relationship with — and I’m not talking BDM-level here, I’m talking decision-making level — who moves on [to a new company] and gives us the comfort that the money is deliverable, and will be able to tell us where [it’s] coming from and how the process is going to work.” He added that someone randomly calling him and offering a “silly rate” doesn’t appeal and, in his opinion, does more damage than good.

Bridget agreed that while headline rates and high LTVs grab your attention, they don’t mean that much to a broker; it always comes down to whether they have a good relationship and previous experience with the company in question. “Our business is mainly [built] on referrals from our developers; we can’t afford to let them down.” 

She highlighted that when you get told one thing by the face of a lender and then something different from their colleague when submitting a case, it can sound like they are “from two different companies” — a problem she describes as very frustrating. 

When covering the questions that brokers should be asking new and existing bridging lenders in order to protect their clients’ interests, Nina said not only is it important to understand the customer’s plans, but also the internal journey. “Who is the decision maker? Do we get to speak to [them]? How many people are in the chain to get to that decision?” 

She also thinks it’s useful to understand who the third-party professionals are – such as solicitors, valuers and quantity surveyors – as this can also give an insight into what their requirements are like and how a loan will progress if they have previous experience with them.  

David warned that if a broker doesn’t get direct answers to their questions, then it is likely that the process will be “tortuous” with that lender. He also urged introducers to present cases well with all the information. “If you want a good relationship with a lender, tell us warts and all. We can then make a decision.”

He claimed that terms coming back from a lender quickly are often in the hope that it will bring the broker into a conversation to drag a deal across the line. “If there are points that need expanding on or clarity, do it at the right point in time, not when it gets to the [stage when the] client thinks they’re completing on Friday and the lender turns round on Thursday and says, ‘I need all these points…’ We should never get in that position if we’re communicating throughout the process.” 

Flipping the script, the group was asked how well-versed new brokers in the bridging market are. John suggested that experienced brokers from the mortgage sector should have a good grounding, as they would have been required to complete their CeMAP and vigorous training. “I think that should be brought into the commercial world, as people come into [the space, which] is less regulated, but they do need that training both on a technical level and [through] experience.”

On the topic of how the way bridging lenders are funded affects the way they make decisions, Stuart shared that he was concerned about the number of finance providers that borrow money at relatively higher rates on fixed terms and are forced to get it out the door or face heavy fees. “They start to make really bad decisions as a result of that,” he said. “We actually spend as much time, if not more, looking at the flow of capital into our business as we do making the sales. Anyone can say, ‘We’ll sell this at whatever rate and LTV’, but if you haven’t got the money and need to go and find it, it’s just going to cause problems.” 

The full virtual roundtable can be watched below.

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