One of the driving factors in the greater levels of bridging business seen over the last year or so has been the growth in the number of brokers actively diversifying into this product space.
Increasing numbers of advisers are broadening their offering to include bridging loans, having recognised how short-term funding can play a more important role for their investor clients.
This is a hugely encouraging development, but it’s important for brokers new to the sector – and even those who may have written bridging loans in the past – to understand some of the typical pressure points in the process which can lead to delays in making progress on a case.
Avoiding gaps
With bridging, speed is often of the essence, so borrowers and brokers alike want to get things moving. However, there are times when this need for speed can hinder a case’s chances, with important information sometimes slipping through the cracks.
This needs to be avoided as much as possible, so it’s important for brokers to take a little extra time to make sure all of the necessary details are supplied to the lender from the outset.
We have seen incomplete application forms, for example, which have meant full searches could not be carried out straightaway, or even mistakes over the corporate structure being used by the client, meaning you have to go back to the beginning.
Making sure that the information supplied is comprehensive and correct will boost the chances of the case moving forward at pace.
What does the lender need?
The last thing anyone involved in a bridging deal really wants is a back and forth over details to do with the case. All this leads to is a more protracted process rather than getting the case over the line, but it can be avoided if the broker understands what the lender is going to need to know.
For example, if the broker and borrower can declare the source of funds for deposits or works, then the lender is able to get the correct legal documents out swiftly. Similarly, if full information on the tenancies and lease or planning approvals is supplied at the outset, then there will be few assumptions involved in the valuation.
Dialogue is fundamental here – lenders need to be clear with brokers about precisely what is going to be needed for a case to progress from the very beginning.
Looking for the exit
A crucial element of any bridging loan is the exit strategy. Given the short-term nature of the loan, lenders will want to have confidence the borrower has thought through how they are going to pay off the loan a year or so down the line.
It’s important for brokers to ensure their clients do have some sort of exit plan in place, and even better if there is some flexibility around that plan so that adaptations can be made if or when market conditions change.
On the subject of exits, the development exit product has taken on a growing importance in the market in recent years, precisely because of those shifts in the state of the market.
Developers who were planning to sell off the fruits of their labour may now need a little more time in order to do so, or may have changed course and elected to hang onto the property for a while, until conditions settle.
If you are handling a development exit case, then it’s important to make sure the warranties and sign-offs are in place on completion, or will be imminently, since this will impact the value of the case. It’s a detail easily overlooked, but which can have a tangible impact on progress.
The legal side
One of the most important aspects of getting a bridging case over the line swiftly is the choice of solicitors.
Many experienced brokers in this market will have had cases where everything seemed to be proceeding at great pace up until a solicitor got involved, and progress ground to a halt, which is why it’s so important not to overlook the legals.
First and foremost, it’s vital for brokers to ensure their client’s solicitor is experienced in this market.
Bridging is considered a specialist area for good reason, and if the solicitor does not have sufficient knowledge then cases can easily slow down or even collapse as a result.
Failing to provide the undertakings straight away can also cause issues, as can the solicitor being based far away from the client, since you end up relying on the postal service for getting documents signed.
While picking the right solicitor is crucial, there can also be a danger in relying on them too much, in order to act as a conduit with the lender.
For example, if a case is to proceed swiftly it’s important for aspects like the ASTs, the energy performance certificates and fire-risk assessments to be provided by the client to the lender and the solicitor at the same time.
Supplying the details solely to the solicitor, and expecting them to hand the information over to the lender will only slow things down.
Working together
Ultimately brokers and lenders are partners on bridging deals. It’s in all of our interests to work closely together to ensure cases reach a successful outcome, but I know that the reality can be somewhat different for those new to the sector.
That’s why it’s crucial to quickly identify the lenders with a track record in this industry, who know how to support newer brokers and will take steps to prevent delays before they even occur. Together, we can deliver a better experience for our borrowers.
Jaxon Stevens is sales director at Tuscan Capital
