It’s not that long ago that short-term finance, or, perhaps more specifically, bridging finance were viewed as dirty words by mortgage brokers. The rates on offer were punishing, meaning there were only a handful of situations where it would be appropriate to arrange one. Some lenders didn’t exactly uphold great reputations for service standards either; in places the tag of ‘loan of last resort’ was deserving.
Thankfully, the market today is completely different. As an industry, lenders have committed to raising standards, with members of the Association of Short Term Lenders promising to abide by its code of conduct. That has resulted in lenders delivering a much more satisfying experience to brokers and borrowers alike.
Nonetheless, at LendInvest we believe that short-term finance could be utilised far more widely by intermediaries and their clients, with some misheld preconceptions holding them back from embracing the opportunities offered by bridging loans.
Prices have fallen significantly
Competition has played a big part in the thriving bridging market that we see today. Established lenders like LendInvest have built solid, dependable relationships with brokers across the market. Others have seen that success from the outside, including a number of challenger banks, and moved into the short-term finance market too.
An inevitable byproduct of that competition has been to force prices down. The rates available on short-term finance today are as low as they have ever been.
As rates have fallen, the potential uses for bridging loans have grown too, making them a useful tool for intermediaries to turn to. Far from being a loan only appropriate if you can’t get funding from a mainstream lender, bridging loans are now so competitively priced that they should be the first port of call for property investors looking to move quickly.
Investors thrive they when they are helped to make the most of the opportunities they spot. Lenders that can deliver competitively priced funding quickly and efficiently will always hold appeal.
Bridgers embrace product innovation
It’s not just the price of borrowing that makes a bridging loan worth considering for your clients though. Competition has also pushed lenders to be more innovative with their product design, to sculpt loans which precisely meet the needs of the borrower rather than expecting them to to fall within a ‘one-size-fits-all’ approach.
That means building a broad, diverse product range, something LendInvest has devoted a lot of time to over the last year.
First we broke our bridging loan proposition into tiers, to reflect the different standards of risk associated with different projects. Since then we have launched dedicated auction finance and development exit finance products, with further launches planned for this year.
Each product meets the exact needs of borrowers in that position – a bridging loan today is so much more than a pricey loan to tide you over until you can refinance.
I want to do more, but I don’t know how
For brokers keen on bridging, the National Association of Commercial Finance Brokers (NACFB) is a great place to find out more. It’s a trade body that educates members on what’s available to their clients, and has built a dedicated service to ensure you get the right guidance to comply with the Consumer Credit Act. It is bringing fresh talent into the industry through its apprentice scheme too, introducing young and enthusiastic brokers into the market.
Equally, it may be worth partnering with a short-term specialist distributor. You may only have one or two clients a year that could benefit from a bridging loan of some form, but they can still provide a valuable revenue stream. Making use of a specialist means that you still enjoy an income from the client, and they are looked after by professionals who know what they are doing.
Finally, lenders are always keen to talk about their products! Speak to the lenders active in your area, get them to talk through exactly which cases they will look at… and which they won’t. You may be surprised at just how many of your clients would benefit from short-term finance.
The bridging market of old is gone. With low rates, innovative product designs and skilled, experienced underwriters in place, bridging loans are a much more adaptable, flexible form of borrowing than they once were.
If you aren’t already involved in the market, then now is the time to change that.