We live in a regulatory world and there is no point in behaving like ostriches as demand for short-term loans is as strong as ever
When it comes to the UK short term lending market at the moment, the good news keeps coming. The Association of Short Term Lenders and the National Association of Commercial Finance Brokers have both issued data recently, which confirm the rude health of the bridging market.
The ASTL shows from members’ figures that overall numbers were up 16.9 per cent in the second quarter, with the second quarter’s lending reaching over £280m.
The NACFB recorded a year on year increase of over 50 per cent in bridging lending in a wider report covering commercial lending.
This confounds the widely held belief that the bridging market had reached the point of saturation and that all that lay ahead was a series of reducing figures as the market rebalanced and traditional lenders started to regain business.
From the reactions of the chief executives of both organisations, it is clear that although there are signs in the general economy of recovery, lending opportunities continue to lag.
According to Benson Hersch, chief executive of the ASTL, bridging and other forms of alternative finance are increasingly being used by SME’s to meet funding requirements and from the evidence from enquiries and applications coming across our desks, the demand for short term finance is as strong as ever.
Leaving aside the self congratulatory mood in the market, it is worth remembering that we are living in a regulatory world and there is no point in some players, both lenders and brokers, still behaving like ostriches and trying to ignore the demands of doing business in the 21st century.
With bridging straddling both the ordinary consumer market and professional developers and landlords, it should be easy to see where there is a need to protect those who might be vulnerable to exploitation.
However, the dream of a sustainable self regulated market even for ‘professional’ landlords and developers ignores the less savoury aspects of the human condition.
While the majority of lenders and intermediaries have always looked to ensure that the customers are provided with the best service from the best available provider, unfortunately there will always be a small hard core who believe that helping themselves comes first.
In a perfect world, a regulator would not be necessary.
The intensity of that oversight is, however, up to all of us. Fighting the battle to promote self regulation has already been lost by every sector of the financial services market. Regulation, for all its shortcomings, is here to stay.
Back to the bread and butter business! I thought it worth highlighting another facet of the amazing flexibility of bridging.
We are getting a lot of enquiries for development finance and often the high street banks are keen to lend, but most sites can be sold by the time these lenders make a decision.
So often it is left to the bridging fraternity to take up the slack.
Speed is everything for a developer and bridging can deliver that timely short term solution that can mean the difference between the deal happening or a client losing the opportunity.
Another product, which I feel really needs to be better appreciated by brokers and clients is the bridge to let product.
The market has been crying out for a seamless proposition which gives the borrower the comfort of knowing funding is in place today when needed and more importantly, the longer term.
Shawbrook is able to offer both products.
There are some restrictions but they enable the client to cover the costs of refurbishment and borrow up to 75 per cent of the revised valuation.
This way, there are costs savings to be had, through a reduced arrangement fee and legal fees.
The product that has been well promoted is the Precise bridge to let, and it has certainly caught the attention of a number of specialist brokers.
The client just needs to retain the bridging finance for a minimum of four months and then switch to a term product.
Other than the ease of dealing with one lender, the client is able to raise further borrowing to 75 per cent of the increased valuation, regardless of the cost of the refurbishments and Precise is offering a free valuation and free legals on the buy-to-let loan.