In order to find out whether standards are improving in the bridging and short term finance sector, Bridging & Commercial enlisted Colin Sanders, Chief Executive Officer at Omni Capital, to tell us what he believes... 

A question I’m often asked is whether I believe standards are improving in bridging. Having given it much thought, I’m comfortable answering in the affirmative. 

Bridging has markedly raised its profile in recent years. It is also becoming better understood. This is a change for the better, as greater scrutiny and awareness encourages more responsible behavior. 

By way of example, I think that the products and processes associated with bridging are becoming less opaque, less baffling. There’s more to do in this regard, but we’re already seeing a better understanding on the part of new-entrant intermediaries and the end-customer. But what’s driving it? 

I think a number of factors are in play. Firstly, we’ve all learnt some valuable lessons from the credit crunch, not least that a sustainable, viable proposition cannot be built on purely short-term goals. 

Secondly, there have been a number of significant new lender entrants to the sector, many of whom have direct experience of operating in fully-regulated markets. This is having the double effect of stimulating competition while encouraging greater rigour in product and process design.  

And thirdly, mainstream funding continues to be rationed. Bridging finance has stepped in to fill part of the void. In doing so, it has raised its profile and is subject to closer critical scrutiny, not least from the media.

Are Products Progressing?

I mentioned earlier that bridging products have become less opaque. But what makes for a ‘responsible’ product?

First and foremost, it must be transparent and clear to the end-customer from the outset. All fees and costs should be fully explained and clearly detailed. It should also be of obvious benefit to the customer. Critically, and well ahead of the expiry date, there should be a clear mutual understanding of the customer’s exit strategy.

But bridging is a distinct form of lending for a distinct purpose. The risks associated with it are different from other forms of secured lending, a fact not always widely appreciated.

While these distinctions will continue, bridging providers shouldn’t be fearful of importing the best practices that have evolved in mainstream lending, such as enhanced transparency, rigorous product design and service excellence.

Open to Abuse?

Is bridging open to abuse by unscrupulous developers and poor advisers?

While there’s no hard-and-fast evidence of systemic or endemic abuse, it’s a question that shouldn’t be dismissed lightly. The bridging sector has seen an influx of advisers keen to tap into its opportunities. Some have limited experience of bridging and may not always be in the ideal position to offer best advice.

Developers too have been attracted in increasing numbers, particularly as they struggle to access mainstream funding. Whether this causes a minority to observe less than best practice is a moot point but one requiring consideration.

But checks and balances exist. Customers themselves are generally far more financially savvy than in the past. There are also plenty of experienced and reputable intermediaries operating in the sector. Increasingly, they are finding an enhanced role servicing the bridging needs of less-experienced brokers.

Ultimately, however, it’s the responsibility of lenders to ensure their processes are as robust as possible. Bridging has much to offer, and nobody with a long-term interest in the future of the sector will benefit should abuse be allowed to take hold.

A Bright Future?

One thing we can all agree on is that in the post-credit crunch era there is far greater awareness of the need for responsible behaviour.

With this firmly in mind – and with mainstream funding likely to be in short supply for years to come – it’s difficult not to optimistic. Working together, brokers and lenders have much to gain from a revitalised sector once derided as ‘lending of last resort’.