It is a bit late for predictions as to how the year will pan out but, even with three months gone, I see no problem in having a little gander into the future. One nailed-on certainty is that the bridging market will go from strength to strength.
News from the Association of Short Term Lenders on the last quarter of 2017 is that bridging loan completions topped £1bn for the first time. The value of loans written in Q4 were up 19.6 per cent on the previous quarter and annual completions by 24.6 per cent to exceed £3.5bn by the end of the year.
It is hardly surprising then that the sector is attracting so much attention from investors, both home grown and international. Indeed, I cannot remember a time when there was so much new lender activity in the market.
It is easy to become complacent with all this new money sloshing around but if you are an adviser reading this and you are not actively involved in the bridging sector already, you really should be.
The need for independent advice has never been so critical. The great thing about having so much choice of lender and product range is the fact it means there is a greater need for good advice.
As an aside, the fallout from a certain bank, whose “restructuring” division actually made it harder for some of its small and medium-sized enterprise borrowing clients to trade out of any difficulties they might have had, still had the power to shock. In some cases, SME clients were forced to the wall.
It is a story that demonstrated how a monopoly position as a funding provider can be abused. Fortunately, SMEs have a far greater choice of funders and no longer have to rely on their banks. It is important that more SMEs are made aware of just how the funding market has changed and that choice of lender can be made a great deal easier by seeking advice from an adviser who can access a whole-of-market solution.
Bread-and-butter cases for most brokers – arranging a standard high-street mortgage for clients – are becoming less and less the norm. The standard borrower, without a credit blemish or non-standard income, is becoming more the exception than the rule.
Banks and building societies are making it easier for existing customers to obtain finance when the applicant fits the right boxes and they will compete strongly with advisers for this kind of standard business.
Which leads me back to the specialist lending market and the opportunities for conventional brokers to expand their advice. The bridging sector is a great area for advisers to look at and participate in.
It is good that new lenders that have come to market recently are being guided by some very experienced individuals. The team behind Dragonfly, led by Jonathan Samuels and Mark Posniak, have returned with new lender Octane Capital and are already making positive waves. More recently, Colin Sanders made a welcome reappearance with Tuscan Capital.
Any potential funders looking at ways to break into the UK market should look carefully at the launch of these new lenders. In a crowded marketplace, the great differentiator is not in sharp products and sharper margins (although product and price remain important key ingredients). It lies in the quality, experience and plain business nous of the individuals in charge of them. Nothing inspires confidence in a new proposition like the reputation of its leaders.
In Samuels, Posniak and Sanders, intermediaries can be confident these guys know what they are talking about and what it takes to deliver the kind of proposition and service its brokers and their clients expect. This level of experience and know-how has incalculable value.
A new start-up in the bridging market needs to be able to hit the ground running, to build the necessary momentum.
So a note for potential investors out there: no matter how good your funding, the key component for success is to find yourselves people of the calibre of the gentlemen I have mentioned.
Phil Jay is director of Complete FS