he game build a better bridge and do the right thing by your client
are funded, how long they have been around, or what experience the people behind the business have, are they transparent with their fees, whether they have subscribed to any trade bodies, associations or even an FSA regulated lender. There is not right or wrong way to establish relationships, and the aforementioned considerations are not all essential when assessing a lender’s credibility.
RJ In the past 12 months there have been more new entrants to the bridging sector and then any other sector in the UK lending industry. Some of these new entrants like Omni Capital and Precise Mortgages have provided fantastic competition with their innovative products and dynamic teams. They have made many of the existing lenders up their game and this has resulted in a halcyon era for the short-term lending market. One decent charter mark is seeing whether a lender is part of one of the three recognised trade bodies. These are The Association of Short Term Lenders, The Association of Bridging Professionals and the National Association of Commercial Finance Brokers. Although trade associations have their critics one thing for certain is that the industry is in better health with their existence then it would be without them.
A lender has to pay to keep their membership so make sure that they are a member of at least one of them is a good place to start. Another important consideration is the quality of the management
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team. This should be part of your due diligence and I would urge intermediaries not to take this research lightly. If your chosen lender is worthy they should have people/persons that are experienced in lending and not journeyman who have moved into the next way to make a fast buck. Many of the new lenders will be small businesses with just one or two staff and often no experience of the market and that would cause me an issue.
I AM TRYING TO ARRANGE COMMERCIAL FINANCE FOR MY CLIENT WHO IS LOOKING TO BUY A COMMERCIAL INVESTMENT PROPERTY AT AUCTION, SHOULD I CONSIDER A BRIDGE FOR THEM?
LH Quite often a bridge is perfect for this scenario because commercial mortgages generally take longer to arrange and complete than residential mortgages, and there would be little hope of the client meeting the completion deadline. If the property is intended as an investment then it can be difficult to obtain a long term commercial mortgage if the property does not already have a tenant in place, so using a bridge would give the client time to buy the property, find a tenant and then remortgage.
Lenders will be more cautious when it comes to loan to values for commercial bridging, typically around 65%. Always express to your client the importance of having considered their financing options before heading off to the auctions, as this is a classic mistake which
can turn out to be a very expensive one.
RJ Purchasing a commercial investment property at auction remains quite an unusual scenario and any examination of any sales pack from a top 10 UK auction house will show that these are dominated by residential property and not commercial finance. Bridging lenders generally don’t like commercial property and those that so it would either reduce their loan to value down to around 50% or take a 90 day market value instead of the conventional 180 day market value and that will reduce the real loan to value quite considerably. If a client needs to bridge then as well as a significant deposit they will need to agree an exit before they commit to this purchase. A lender shouldn’t accept a bridge without an exit and it would be pure madness for a client to consider it. One point a client needs to fully understand is the moment the auctioneers hammer hits his block the successful bidder exchanges on the property immediately and pays at least a 5% deposit but often as much as 10%. If they fail to complete within 28 days they will pay additional penalty interest to the vendor and if they still fail to complete after 14 days they will lose/be liable to pay, 10% of the purchase price. Like all finance on auction purchasers, clients should apply for finance as soon as they can which will give them the best possible way of completing on their purchase.
BRIDGING INTRODUCER MARCH 2012 21
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