Distribution strategy for 'big-ticket' lending

Distribution strategy for 'big-ticket' lending


Distribution strategy is key for successful lending. Getting the right partners on board, and judging the market accurately, can make all the difference for successful bridging lenders. One company whose proposition focuses on carefully selected partners is short term specialist Omni Capital. Bob Sturges, Head of Communication at the company, explains more... 

When we re-launched our broker proposition in September 2011, we made a considered and deliberate decision to distribute through a defined panel of partners rather than adopt a whole-of-broker market approach. 

Our panel comprises brokers, master-brokers, packagers and distributors. All are experts in bridging and short term lending and share a clear understanding of how Omni Capital operates, and the type of business for which we have an appetite.

While not set in stone – we expect the panel to grow incrementally – its structure causes us to rely on a relatively small, but highly productive, number of intermediaries for business flow. As such, the vast majority of deal introductions originate via these familiar partners. 

As a distribution strategy it may not be suitable for every lender, but our recorded success to date bears testimony to its effectiveness for our particular business model. But it’s important to recognise it isn’t just about quantity; quality and quantum are key measurements too, probably more so. Let me explain.

We have a particular appetite for ‘big-ticket’ business, both first and second charge. The effort, cost and resource we expend on these more complex deals is balanced by the quality of risk and quantum of return. A similar risk-reward ratio is, in our experience, more difficult to achieve through writing large numbers of smaller-value deals. Fortunately, our panel is adept at sourcing just what we want. 

Right now, the bridging sector has two trump cards over other parts of the UK lending market: funding and flexibility. As a result, bridging lenders are far more nimble and responsive than their mainstream counterparts, a fact reflected in most lenders’ product ranges. Ours is no exception.

To be successful, a lender’s product range must satisfy two needs: that of the market and those of its funders/investors. If the lender mis-calculates the risk-reward component they face the prospect of losing their funding. If they mis-judge the market, they’ll fail to attract the right type of business.

There needs to be a degree of flexibility built into lenders’ product structures and how the lending criteria are applied. Bridging can be complex, multi-layered and unpredictable. Negotiation plays a large part in converting enquiries into tangible deals and completions. Inflexibility, particularly at a time of sharpened competitiveness, is a considerable vote-loser.

By working with partners we know and trust we’re able to exercise a great deal of commonsense when negotiating terms and conditions. We’re helped enormously in this by the fact we have in-house funding – no external investors to please. Working with unfamiliar brokers would make this more difficult.

As our brand and products become more widely recognised we are seeing an increase in enquiries from intermediaries with whom we have not previously dealt. Some are inexperienced in bridging but recognise they are ignoring a potentially-lucrative business stream. Others have some experience and are looking for assistance in converting their deal enquiries.

In the case of the former, we offer to effect an introduction to one of our panel members to help ‘mentor’ them through the nuances of the bridging process. Most are happy to accept. For the latter, we’re only too pleased to work directly with them provided we’re satisfied they can meet our packaging requirements. From such beginnings do long-term relationships develop.

While its profile has clearly been raised over the past few years, there is still some way to go for bridging to receive the attention from brokers it merits. Many still look upon the sector with suspicion, even contempt, while others are deterred by the perceived complexities. Taking our message out to the wider introducer community can only be of benefit.

It’s encouraging to see this happening. Bridging roadshows are becoming a familiar feature on the calendar, as are distributor-hosted seminars. The fact the major mortgage networks are waking up to short term lending is a break-through event. Extending its reach into the world of Appointed Representatives promises significant opportunities for master-brokers, packagers and lenders alike.

Along with de-mystifying many aspects of bridging, the education process should help eliminate some of the more abusive and careless behaviour we see on occasions. As the regulators turn up the heat, this can only be to our long-term advantage.


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