We seem to be in a golden period where investment into the bridging market and other so-called alternative investments are booming. Due to low interest rates being offered on traditional investment products, both private investors and financial institutions with cash are no longer happy with receiving between 1 per cent to 3 per cent p.a. on their money, and so are increasingly looking at alternative ways in which to make their cash work harder to make a higher return.

In recent months, we are seeing more and more news stories regarding bridging lenders securing new funding lines, whether that is via institutional investment, private investors or peer-to-peer investment routes. Not a month goes by without a bridging lender sending out a press release to this effect, but what is this doing to the bridging market from a borrower’s perspective?

Lending restrictions

It all depends on the terms and conditions associated with these new funding lines, and where the cash is coming from. Most institutional investment (e.g. bank credit lines and hedge fund investment) will have strict conditions attached to them, which will restrict the bridging lender on what types of bridging loans they can facilitate.

Whilst investment from private individuals could be seen as a more flexible form of finance with fewer restrictive conditions, lately there has been an increasing trend for private investors to invest via a fund model. These fund models of investment will also have strict conditions associated as to where and what bridging loans they can look to facilitate. It would appear that these so-called private investors are now becoming, by definition, institutional investors into bridging lenders.

With all these new funding lines coming into the bridging market, bridging lenders may be forced to tighten their criteria to fit in with investment criteria of their investors. These investors may also be required to look at and subsequently sign off each and every deal, therefore making the process more time consuming than it could be. Both of which will be detrimental to borrowers looking for quick decisions and completions.

Most institutional investors will have a number of restricting conditions on what loans their funds can facilitate; whether it be the type of property, geographical location, loan to value, maximum and minimum loan amount, maximum and minimum loan term etc.

So, is a bridging lender with investors, who put strict restrictive conditions on how and where their funds are deployed true, principal lenders?

A true principal lender

If you are a principal lender then you should have the first and final decision on what your investment criteria is, and what loans you can facilitate. But is it true to say this about all principal lenders within the bridging market?

There appears to be no clarity or transparency as to what defines a ‘principal lender’. In my eyes a principal lender lends their own funds, meaning that they make the decision as to what they can lend on, where they lend it and what their lending criteria is.

Hope

At Hope Capital, we lend our own family funds on every deal. We do not require any external processes in order to complete a bridging loan within the quick completion timescales of a borrower. This gives us the ultimate amount of flexibility when looking at each and every bridging loan we receive.

We consider ourselves principal lenders in the strictest of terms. Whether you are the borrower, broker or intermediary; the financial decision maker will deal with each and every bridging loan application from the outset all the way to completion, without the need to tick the boxes of any external investor conditions.

As a true principal lender, Hope Capital can make quick decisions and turnarounds to meet clients’ requirements, and be flexible on repayment options. Unlike other lenders, Hope Capital is in a position to evaluate each case on its own individual merits.

Using our own family funds means we can be quick, flexible, specialist and transparent throughout the whole bridging loan process, giving us the ability to offer a decision in principle within hours of each enquiry. Quick decisions and turnarounds are key to Hope Capital’s success.

Research undertaken earlier this year found that the most important requirement for brokers when selecting a bridging lender was the speed of decision making, whilst one of the biggest fears was lenders tightening their lending criteria.

Hope Capital are not bound by any loan conditions and restrictions that other bridging companies are due to their institutional funding routes, so only we decide on our lending criteria and what loans we facilitate, nobody else.

Ultimately the bridging loan market is all about quality service, speed of decision-making and flexibility towards borrowers’ financial requirements. Being a true principal lender allows Hope Capital to offer this to borrowers without any outside investor influence.