Major bridging lender weighs in on upfront fees debate

Major bridging lender weighs in on upfront fees debate


Following our article on upfront fees in bridging finance, which received a huge response from both brokers and lenders, Alan Margolis, the chief executive officer at bridging loan company Cheval, tells Bridging & Commercial his stance on the contentious subject: 

There has recently been some consternation about the practice of some bridging companies charging “upfront” fees which are wholly or partially non-refundable.


Given the speed that most bridging companies operate; there is of course almost always one non-refundable cost incurred by borrowers - the valuation. Given that valuations are undertaken by independent 3rd party valuers, the concept of a borrower paying for the valuation is well established, even if the final report is such that the loan does not proceed because of its contents and the borrower is “out of pocket” as a result.


However, other forms of “upfront fees” are more contentious. Where these are non-refundable or part refundable at the lender’s discretion, the borrower runs the risk that fees may be paid but loans do not proceed.


Such fees may be termed “Application Fees”, “Solicitors Fees” or “Commitment Fees”. In Cheval’s view, the label is immaterial provided that the amount of the fee, whether it is wholly or partially refundable, and the circumstances in which it is refundable are made absolutely clear at the outset and that there are no “conditions” hidden in the small print.


Intermediaries have a choice. The bridging market is extremely active and competitive and not all lenders charge upfront fees. If intermediaries are concerned about their clients having to pay upfront fees, they can always approach lenders who do not charge such fees. If intermediaries still believe that it’s in their client’s best interest to run with a lender that charges such fees, they are, in our view, obliged to ascertain precisely how those fees are applied and if, when and how they are refundable.


Cheval and its solicitors do not charge upfront fees. It is part of our commitment to assuring the borrowers and their intermediaries that we strive to complete as many loans as possible – that we make our money by completing loans and not processing them!


There is a caveat here that many intermediaries will recognise. Where a loan application is particularly complicated e.g. there are multiple securities and/or a complex ownership structure, then it is quite legitimate for a lender and its solicitors to ask for a Commitment Fee (which may be non-refundable) from the borrower. Such fees reflect the enormous amount of work that may go in to processing such an application. Again, at the risk of stating the obvious, the intermediary and the lender should establish clearly between them in writing the basis on which such a fee is refundable, if at all.


Lastly, all intermediaries and indeed lenders should be aware of the risks posed by those so-called lenders that charge upfront fees without any intention of ever completing loans. These entities have always been lurking in the shadows and tainting respectable short term lenders.


Intermediaries are advised to ensure that they only put proposals to lenders who are members of the Association of Short Term Lenders (ASTL). All ASTL members are in the business of lending and if intermediaries and their customers have a complaint about the conduct of an ASTL member, then they can always approach the ASTL to investigate and mediate.

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