News Review: Short Term Finance


Bridgers moving towards regulated status


by Paul Brett, business


development director, Borro.com


the news that one of the more proactive bridging lenders has been granted regulated status under the Financial Services authority is an interesting development for the short- term lending industry for a number of reasons. the bridging community has, in my opinion, reached the cross roads which every business channel reaches in time. until recently bridging


was a vital, if peripheral service provided by both the highly ethical and those whose modus operandi, if we are being charitable,


was less than transparent - often to the detriment of introducers and their clients. Big strides have been


made in modern bridging practice and as the industry has moved to centre stage because other sources of finance have dried up, business practice has been pretty exemplary. one of the main reasons behind this move towards regulatory status has been the need for greater acceptance by the wider intermediary community, which already lives within a highly regulated environment. Breaking out from the


niche to the mainstream requires more than just the greater volume of providers we have seen come to market. there is


an increasing demand for regulated products from the intermediary community and those few bridgers that saw the way the world was moving and planned for regulatory status will benefit not only because of increasing demand but because it will allow them to adapt to provide different lending products which are complementary to their core offerings. Bearing in mind the length


of time it takes to receive full authorisation those that took the decision to move to regulated status will have a marked advantage in the immediate future. already the regulator is bringing second charge lending into the regulated fold and clearly there is an agenda to see the whole lending industry under one


Private funding could boost lending


Whatever the government might wish for in terms of lenders lending more, it is clear that the cupboard is bare as far as conventional bank funding is concerned.


Leaving aside the arguments that rules


concerning the establishment of new lenders are too severe and capital adequacy requirements for existing lenders are too stringent, along with the spectre facing banks which, having supped at the well of public funding, need to start making repayments in 2012, the fact remains that currently there is no new money. However, confirming the well-tested theory that nature does not allow a vacuum to exist for any length of time there has been a growing trend to look beyond the normal lines of funding, more specifically the harnessing of private finance. We are seeing this phenomenon particularly


18 mortgage introducer APRIL 2011


in the short-term lending market and to a lesser extent in the secured and unsecured loan markets. A key determinant is that the general lack of available funding has made pricing less of an issue and those who have managed to attract private funding so far have been able to demonstrate return on investment at levels which are clearly very attractive to those investors. Whether there is enough private funding that can be harnessed in the cause of longer- term lending remains to be seen. However if the government was to assess the actual level of private resources available there might be an interesting debate around providing allowances and tax breaks to private investors capable and willing to be part of a wider strategic movement to replace some of the funding that has been lost and shows no sign of returning any time soon.


regulatory roof. there is no doubt that there will still be plenty of non-regulated business but no one has said the goalposts could not be moved again.


Professionalism


backed by ASTL The maturity of the short term lending specialist channel can be measured by how it has engaged in driving standards up among its lenders. The Association of


Short Term Lenders has a membership of around 30 including most of the visible intermediary facing companies. ASTL publishes a series of objectives on its website, the most important being a code of conduct which all its members agree to abide by. I think for intermediaries with concerns about the standing of the bridging companies competing for their business, checking the ASTL website will provide the necessary information as to whether their favoured bridger is a member.


If I was a broker


I would take comfort from choosing a partner which was subject to independent and binding audit in the event of a complaint through the ASTL. For my money, the level


of expertise and the arrival of new lenders allied to a process which puts customer interests at the heart of the wider Treating Customers Fairly agenda suggests that short-term lenders, their introducers and clients are well served by robust self- regulation.


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