Behind the Doors of Montello Bridging Finance

Behind the Doors of Montello Bridging Finance



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Once again Bridging & Commercial took to the road to discover in more detail how bridging companies operate. This time, we were invited for a sneak peek into the inner workings of lender Montello Bridging Finance, who talked us through the Montello Income Fund, their typical processes for us, and took us out for a lovely (and totally undeserved) lunch.

With a slightly smaller outfit than some, Montello is very much a company which dedicates itself to personal relationships and prides itself on the ability to remain flexible in order to best meet the needs of client and broker. We managed to spend some time with all three Directors: Christian Faes, Ian Sutherland and Ian Thomas, who told us a bit more about how the company began.

Set up three years ago, the organisation was originally purely funded by individual investors. Over time, more investors saw an opportunity in Montello, which allowed the company to build a track record and get to know the market, Christian explained to us. A year later, the Montello Income Fund was created, which now acts as the primary deal funder along with a bank line funding a small proportion of deals.

The Fund

 

We sat down with Andrew Wood, Head of Sales and Distribution at the Montello Income Fund, who grows the fund by promoting it to financial advisers. “I market the fund to IFAs, private banks and wealth managers,” he said. “Primarily it is designed for sophisticated investors with high net worth - there is a minimum investment of £20,000, and a maximum of £2 million.”

He explained that the current market suits the fund well as it offers a fixed return of 8.5 per cent per annum to investors, which compares quite favourably with recent static savings options. This is an unregulated, collective investment scheme which is not closed-end.

With a broad range of investors all across the world (although the main bulk are UK-based) the fund focuses primarily on the safe haven of the London residential property – which remains attractive to offshore investors. Allowing for 75 per cent LTV on a first charge basis, the fund enables Montello Bridging Finance to maintain a fairly open product range.

Andrew added: “The fund has different routes to market – the offshore bond route, the pension route and direct to client. It is approved by a number of SIPP and offshore bond providers, and all loans are short-term – typically three to six months.

“I spend about 60-70 per cent of my time out of the office, meeting people and responding to enquiries.”

The growing fund means that Montello has a strong appetite to lend.

So, what would the typical process from loan to completion look like?

The Process

 

Christian told us: “Every Monday morning we go through our current loan book to address the deals that are due to be redeemed and see what cases are in the pipeline and the funds we have coming in. We try to ensure that the inflow to our funds and the deals we are funding out are matched.

“From a broker perspective, if we’re happy with the deal then we are the ones pushing it to completion. We work with the broker to get this done, and to do it as quickly as possible.”

In terms of day-to-day, after a phone call with the introducing broker a member of the team will give a letter of offer before instructing valuation, legal and moving towards completion.

Christian explained that a lot of deals are done through existing relationships. These relationships have not only been built up with mortgage brokers, but with financial advisers, solicitors and lawyers who will provide in roads for many deals. This emphasis on relationships allows decisions in principle to be agreed without all the paperwork needed for completion.

It also means that some private banks and solicitors that act for banks will refer clients they can’t place on to Montello. Christian identifies this flexibility as their unique selling point.

So what are some potential stumbling blocks for a deal?

Fraud is always an issue for any lender. Ian Thomas told us, “Every week we probably see one or two cases that don’t seem right. There’ll be something that just doesn’t quite add up. In that scenario we always check to see if there is an obvious benefit for them to take out a bridge and if not we have to question why they have turned to this type of finance.”

Another thing that can slow things down is not getting the truth initially. Ian clarified that this isn’t because the broker or client is hiding something; instead they think they have provided everything they need without necessarily being aware of every important piece of knowledge.

Regulation and expansion

 

So is Montello looking to expand? Christian certainly didn’t rule anything out, even hinting that the company is interested in medium-term, although, as he emphasised, bridging finance is the core of the company’s business.

He said, “Our fund has been going for two years and we have seen a lot of demand from financial advisers who are impressed with our track record. Almost daily we are now getting enquiries from people we haven’t even pitched to.

“Our investment line is as competitive as anyone in the market in terms of rates. We are on target with the size of our fund; we’re probably looking to grow it for another six to 12 months.”

One thing Montello is looking at though is FSA regulation, having just submitted the initial papers. The company hopes this kite-mark of approval will help with the expansion of the Montello Income Fund as it helps the IFA provide reassurance to investors. The IFA must do a lot of due diligence with regard to the fund, and regulatory approval from the FSA is likely to help both clients and auditors have increased confidence that compliance standards are as high as possible.

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