News Review: Short Term Finance
Bridging misnomer for short-term finance
by Paul Brett, business
development director, borro
Short-term finance has de- servedly seen its star in the as- cendant, particularly over the past two years as the shortage of conventional funding has become more apparent and as a result short-term lending has been instrumental in fill- ing the gap. the increase in the num-
ber of bridging lenders and the growing sophistication of the types of funding behind those lenders has helped to fuel what has become such a valuable asset to intermediar- ies and their clients. When we consider that the bridging industry used to be essential- ly a hand to mouth business with private funds making up the majority of funds avail- able, inevitably as in any cot- tage industry, the customer
experience was variable and terms and conditions could be a minefield for the less observant. today the market has
reached a point of sophistica- tion where the customer ex- perience is largely uniform and transparent and this standardisation of good prac- tice has made it easier to at- tract serious investors to take part.
Growth potential in comparison with other parts of the lending mar- ket, margins are healthy, risk is limited and demand is strong. in the continued absence of significant mainstream bank activity, short-term finance can not only fill the gap but can also become a growing sector of the lending market, regard- less of whether the banks decide to reopen the lending gates. However, for me, the issue remains of defining a more
Too good to be true I have touched before on the subject of short- term lending being a bolt hole for those looking for a more relaxed assessment regime for clients in previous articles. While much of the criticism is nonsense, in a market segment with healthy margins and interest rates which tend to reflect the short-term nature of the transactions, it is probably no surprise that there will always be some carping that it is being used for the wrong purposes.
However it is evident that the market needs
to guard its growing reputation for transparency and openness. We know that fees can vary from lender to lender which is fine, but now that we live in a more competitive marketplace, there has been plenty of activity in the area of rate reduction. All part and parcel of a healthy competitive market, working to the advantage of
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long term strategy to the way in which the industry pro- motes itself.
All in the name While bridging has become the phrase that many use to describe short-term lend- ing, i cannot help but feel it rather limits the description of what short-term lending can provide. regardless of whether the
loan is secured against bricks and mortar or personal assets of value, to lump everything together as bridging limits the understanding of what the industry really has to of- fer. i would like to see us
moving towards a more generic description which does not precondition bro- kers to think just in terms of bridging but underlines short-term finance’s creden- tials as a facility giving ac- cess to funds that provide immediate liquidity for any purpose.
customers and their advisers. However, it has become clear that there have been rumblings that certain methods of achieving a marketing edge over competitors are leaving brokers frustrated. There have been instances of lenders highlighting a very competitive rate, which are clearly superior to everything else in the market. Personally, I see no problem with highlighting a good rate, particularly as it is there in part to showcase the products and service of the lender. What is not so good, is when intermediaries get the perception that though they believe that their clients fit the criteria, lo and behold, due to something in the application the client does not qualify. Of course, those of us who have been around the block a few times, know that when a deal seems to look too good to be true it probably is.
STRUCTURING COMPLEX DEALS As a relative newcomer to the intermediary sector, borro provides short-term finance, taking personal assets as security rather than bricks and mortar and we have worked closely with a number of more traditional short-term lenders. I think it worth pointing out that having a new asset class to use as security really does expand the reach of the short-term lending channel. It is worth amplifying the importance of how partnership between lenders who use different assets as security can provide a rounded facility enabling customers to complete deals, which they would not ordinarily manage. As we lend against personal assets of value such as fine art, antiques, prestige cars etc, borro can provide extra funding when the client has exhausted the property equity or income criteria of the main lenders being used.
The value to brokers and their clients is immense as with one particular deal this year where borro lent £1m against a portfolio of 19th century artworks, as a top up to a conventional bridging facility to help a client secure the purchase of a commercial property. Some top up! As lending remains tight, it will be worth seeing how many intermediaries really catch on to the potential of solutions, which can be generated by engaging lenders in different segments of the short-term lending market.
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