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Commercial Finance Introducer
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responsible. First of all, some bridging lenders on a long term bridge can make a serious dent consolidating other debts and then could be
have shut their doors, or quietly withdrawn in a bridging funder’s cash flow, and so many placed with a sub-prime commercial lender.
from the market. Many rely on funding lines are keen that any proposition comes in with a However, when many specialist lenders left the
which are not as easy to secure as they were. built in exit route – a way to ensure their funds market last year, many of these credit repair
But more significantly, the market has been come back to them in good time. The lack of clients were left on an expensive bridge with
hammered by the collapse of the remortgage remortgage options in both the buy-to-let and nowhere to turn. Offer letters turned out to be
market. commercial mortgage markets has led to an not worth the paper they were printed on as
Bridging is a short term solution and absence of these much-needed exit routes. lenders withdrew without honouring them.
bridging lenders only want to lend for a short Bridging was often used as a method of
amount of time before they are repaid and can credit repair; a client would make six months Other
get the funds out to the next person. A client repayments on a bridging loan while The final one of the three big casualties is the
enigmatic ‘Other’. This category largely consists
of development finance and this is an area
which has taken a huge hit over the last twelve
months. One of the first areas that many
lenders withdrew from when problems started
to surface was the commercial development
finance sector. This part of the commercial
finance market was hit by a double whammy of
nervous lenders and nervous valuers. Those few
lenders who remained in the market tightened
their criteria and reduced their loan-to-values,
while valuers reduced their estimations of
potential final sale values, based on the falling
market. The combination meant that few deals
were written – and gradually lenders withdrew
from this sector of the market altogether.
Good news
I should say a few words about the one good
news story in these figures. The invoice finance
business written by members has seen a year on
year increase of 20 per cent. Much has been
written over the last twelve months on the
subject of diversification. Residential brokers
were encouraged to move into commercial
finance at the first signs of the trouble and
many did, with varying degrees of success. But
for commercial brokers the largest opportunity
has been presented by invoice finance as many
funders are still very active in this sector and
the Association has been working to educate
members about the opportunities presented by
this kind of finance.
Businesses which are finding it difficult to
get finance through overdraft or unsecured
loan are using their debtor book to raise funds.
Funders feel more confident about this kind of
finance because it is secured and, at least in the
case of invoice discounting, they have more
control over the debt collection. This offers
peace of mind to a funder in times of
uncertainty, so it’s hardly surprising to see this
part of the industry grow for brokers.
So, all in all, it has not been a good year for
the commercial finance broking industry.
However these figures do offer an opportunity
at least to counter the recent press stories about
‘banks lending more than ever to business’.
Certainly anecdotal evidence suggests that
that’s a long way from true and these figures
give a very striking picture of the actuality
faced by the SME market – and that picture is
very bleak indeed.
www.mortgageintroducer.com October 2009 Mortgage Introducer
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