Diversity is key in operating a successful business, especially in the current financial climate.
There has been much press coverage surrounding the US non-conforming problems and how they have washed up on UK shores.
But without delving too deeply into the various scenarios that these problems have brought with them, it has come to the fore that firms – of various size and proportion – may struggle if they are inflexible in their business models and have put all their eggs in one basket.
This has undoubtedly raised the question that if brokers are not looking to explore different sectors of the market by now, then why not?
If nothing else positive prevails from the current ‘credit crunch’ then at least it has maybe given firms a kick up the backside and taught us to be aware of the opportunities that surround us and the importance of continuing to evolve our respective businesses.
Without finger pointing, the ones that do not ‘push the envelope’ are generally the ones who will struggle in the long term. We all need to look past the end of our noses in order to survive and, generally speaking, the best way to do this is to continue looking to diversify and make the most of any potential business avenues.
Leaps and bounds
This brings me nicely to the potential that bridging finance offers to the broker.
I admit I wasn’t completely sold on bridging finance in years gone by, but it has come on leaps and bounds over the last year, in market perception as well as service and the improved offerings now available. Products have become a lot more flexible and appealing, while fierce competition has forced the sector to evolve at a rapid rate of knots.
However the problem still seems to be how best to use a bridging loan, as more often than not it is a viable proposition over a secured loan. Unfortunately a lot of enquiries fall at the first hurdle – understanding what the customer needs – but this seems to be the result of the customer not being aware what is involved or how the process is handled.
A viable alternative
Unlike many other forms of finance, bridging is extremely time-sensitive. Individuals want the bridging monies in their bank accounts within days, or not at all. They need to move swiftly because the purchase is time sensitive. If they cannot complete to the seller’s schedule, the preferential terms evaporate and the deal is off. This means that bridging lenders are experts in processing applications within very short timeframes.
Bridging loans do not suit everyone but they can provide a viable alternative to remortgaging for those looking to secure short-term funds quickly. Indeed short-term specialist finance is certainly not the right product for those who are in any form of financial distress. On the contrary, it is designed for those who have some form of wealth through property assets and who wish to use bridging finance to easily and quickly extract liquidity from these assets.
The sector has emerged as a viable option for borrowers looking for a short-term financial solution. It enables borrowers to obtain a set amount of money to secure a property, or make enhancements to their current property, while waiting for a loan from their lender.
As an instant form of remortgaging, there are various ways that bridging finance can help when normal purchasing can fail to deliver real value. In a case where a developer or builder is prepared to sell multiple properties at a discount in exchange for fast completion, bridging finance becomes a hugely important facilitator and profit generator.
Some areas do require special attention though. As with all markets, the valuation is important but what is included in the survey is more important than ever in this particular sector. Lenders are now looking at the comments by the surveyor about ‘the area’, the saleability and most importantly the future value. These can be quantified on properties and land with and without planning permission. It’s also vital to understand just how important the exit strategy is to the whole process and ensure extra time is taken to talk this through in order to get a firm understanding of each and every individual customer’s intentions.
However with products that allow for daily fees, the removal of exit fees and much lower rates, you can see how the bridging loan has morphed into a more accepted form of finance in such a short period of time.
In future, I see bridging becoming more mainstream as the products change, but our industry requires training to recognise these opportunities and be in a position to handle the clients’ expectations better.
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