While bridging loans offer a range of solutions, they also present a number of challenges.
Jonathan Sealey (pictured) is chief executive of Hope Capital
Ten years ago, bridging loans were still considered very niche, and didn’t have the best reputation.
But, fuelled by the credit crunch – which forced high street lenders to tighten their lending criteria – a whole new generation of short term lenders emerged, offering innovative short-term lending products to fill the gap.
As a result, bridging is now a much more mainstream form of lending and is one of the fastest growing areas of finance, estimated to be worth around £4bn a year.
Bridging loans offer a great solution for people who need fast finance, either to enable them to take advantage of a time-limited opportunity, or to provide funds for a financial emergency, so are ideal for those looking to buy at auction or refurbish a property.
But, while bridging loans offer a range of solutions, they also present a number of challenges. And to ensure the loan is successful – both for the borrower and the lender – it is absolutely vital that good lines of communication are set up and managed.
Just because bridging is short-term finance, and the relationship with the customer is initially not a long one, does not mean that the customer relationship is not important. In fact, it is probably more important than with a mainstream loan because there are so many things that need to be considered.
Many short-term lenders only speak to their borrowers at the start and end of the loan process which means communication is very limited, and if something has not been explained early doors – or changes during the loan term – it could cause real problems for both the borrower and the lender.
We ensure we build up great personal relationships with all our clients and their brokers to ensure everyone fully understands the full process.
This close relationship – which includes a face to face meeting or video call with every client – ensures that the borrower understands the terms of the loan and what they need to do if they need an extension. It also means that we can spot any issues early on and make sure we resolve them before they turn into complications that could scupper the process.
Many of our borrowers’ exit strategy is the sale of the property, so we insist that we are kept informed about any interest from potential buyers any viewing and any offers made. And once the sale has been agreed we also make sure we are in contact with the borrower’s solicitor so that we have full knowledge of the process and can then intervene if we feel redemption of the loan may not happen in time, to try and ensure that it does.
By maintaining good relationships with our clients, late redemptions are infrequent. But when they do happen, the regular communication that we insist on means we have developed a good mutual relationship which makes finding a solution that suits all parties is much easier.
