Whilst we regularly report on specialist bridging, commercial and short-term finance, B&C thought it was about time we went right back to the start, so we sought the help of an industry stalwart, Sidney Cohen, to find out where bridging actually came from…

Any new entrant into the finance/mortgage world would view bridging as just another variation on a mortgage, with the term of the loan being the major difference. To a large extent that is true but it has not always been this way; so where did it all start from?

If I look back to pre-1996 (or thereabouts) the majority of the companies offering bridging loans were private individuals operating with a "pot" of private funds. They had a limited capacity to lend as they were often waiting for a bridge to be redeemed so that they could put out the next loan.

Looking back, it is surprising how many variations in the lending terms there were. Let me give you some examples:

(1) One lender would look at what the monthly repayment on the ‘take out’ mortgage would be. They would then make that the minimum payment they expected to receive, with the balance rolled up until the bridge was redeemed.

The logic behind this was that when the ‘take out’ lender wrote to ask if the borrower had made satisfactory monthly payments of XYZ on the bridge, they could always give a positive reply. I am certain that they never mentioned the sum being rolled up.

(2) An interesting position was held by another bridger – who was also a solicitor – in that, although they wanted to retain interest over the whole of the bridge, they would exclude the ‘retained interest’ from the LTV calculation.

When I asked them why they did this (and they were the only one that did) their answer was, "Well, as I still have that sum in my bank account I don’t include it in the sum lent.”

(3) Yet another lender would lend based solely on equity excluding every factor; as long as the borrower had “equity and a pulse" they would lend. The only reason I mention them is to highlight how the bridging market has changed, because it was how they dealt with requests for a reference. Bearing in mind that they did not retain interest, their answer was always, "Payments have been made in the manner that I expected" and, as they never expected anybody to make any payments, that statement covered every permutation.

Around 1996/1997 when sub-prime mortgages had not only arrived in England but had grown to dominate the mortgage market things begun to change. The big driving force was the ready availability of the ‘take out re-mortgage’, available no matter what the circumstances were, be they missed mortgage payments, sufficient CCJs or to repaper your office walls with. With that major change occurring, the doors were now open for bulk bridging to move into the mainstream.

Banks were granting structured funding lines to bridgers and the industry welcomed them with open arms.

The new style bridgers made their documentation, systems and general procedures as close to mortgage/loan documentation as possible. This in turn, enabled brokers who never bothered with bridging to enter this new field as it so closely resembled what they were used to dealing with.

With a huge number of bridgers now operating and competing for business (I understand that number to be well over 100 now), I am certain that some new entrants will enter the market and take bridging into the next phase of its evolution.