Bridging Lenders & Banks: A symbiotic relationship?

Bridging Lenders & Banks: A symbiotic relationship?



The January 2012 Market Report, conducted by the AOBP, revealed that a significant number of bridging lenders saw an overall increase in volumes of business last year. In particular, the survey established that of this rise in lending, a whopping 96 per cent was of non-regulated bridging.

Looking ahead, growth of bridging business for alternative lenders is expected to continue as there become more opportunities in the wake of largely hesitant High Street banks.

Whilst murmurs from the wider financial community suggest the detrimental effects of this reluctance to lend for personal finances and SMEs, B&C looks closer at the increasing positive dynamics between the High Street and alternative lenders, who are fulfilling the funding gap left behind by the mainstream financiers.

It has long been considered that a rivalry between the High Street and alternative lenders exists as they compete for business, but it is exactly this competition which is establishing lucrative relationships and providing opportunities for a growth for smaller lenders.

To retain long-term lucrative clients, High Street lenders are opting to outsource business to specialist bridging lenders, providing a complimentary service rather than competitive, where they are unable to supply a suitable product with a speedy turn-around time.

Explaining the nature of this relationship in more detail, B&C spoke to Mark Posniak, Head of Marketing and Operations at Dragonfly Property Finance, who said: “We do have a relationship with certain banks that approach us to do deals that they can’t in a short turn-around time for high profile clients who they still want to provide a service for. Private banks often have long processes which doesn’t suit the speed required for a bridging loan.

“Referrals are a great source of business although rare – there are no hard and fast rules with who we take referrals from as these relationships with bankers are built on years of working in the sector that come to us with the assurance that we can provide a good service to their client.”

But, when asked if the referrals are reciprocated back to the bank if the client requires a longer term solution, Mark said: “We don’t outwardly refer deals as we are an intermediary based lender - our relationships with these introducers is one of the most valued part of our business.”

Giving us a little insight into the types of cases that receive these referrals, we spoke to David Fine, Business Development Manager at White Rose Finance Group, who told us about a deal he recently introduced to United Trust Bank from Lloyds TSB, who were unable to complete quickly enough for the client's timescale.

David also highlighted that it is not only in bridging cases where these referrals take place. He further explained: “We often get referrals from banks and not just for products they cannot support but also if a loan is out of their criteria for say a commercial mortgage but may fit with a niche lender. Business lending managers don't like to just say no particularly to existing clients - if they can say no but speak to these guys (us) then they are still shown as being supportive of the client.”

Yet, Steven Nicholas, CEO at Tiuta, believes that this stream of business is not commonplace and, even if it was, it would be hard to accurately gauge how common. He said: “It is the sort of issue that is commercially sensitive so it is perhaps unsurprising that this sort of information isn’t necessarily in the public domain.”

Nevertheless Alan Margolis, Head of Bridging at United Trust Bank, offered his thoughts on this relationship, establishing the positives of using a specialist lender. “There appears to be a disconnection between the High Street banks and reputable bridgers, as the nature of these two types of business models operate very differently. When it comes to short term bridging, you have relatively small bridging lenders who operate a specialist and flexible operation, which is difficult for these large banks to match.”

He also noted possible reasons for this divide: “Customers are rarely referred directly to us by High Street banks as employees in these large institutions probably don’t know enough about bridging and the lenders who specifically cater for the short term. The large High Street banks don’t cater for niche markets so they are unlikely to know how to help those who require bridging loans.”

And so out of every negative, there appears to be a huge positive here, with excellent opportunities for short-term specialists opening up for a unique source of income. The rigid criteria set by most banks means that the non-regulated sector has the ability to grow enormously and intermediaries who know lenders products well can reap the benefits. 

However, such referrals are rare and cannot be solely relied upon as relationships are often formed from working in the industry on a long-term basis and knowing the niche lender personally. These opportunities can be maximised from establishing continual contact with both the High Street and smaller lenders or by making meetings at local business centres.


By Alexandra Jones

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