This bridging company X is allegedly doing this rate; and bridging company Y claims they are lending to this LTV; and we could go on. It won’t be long until there will be a bridging company claiming they are lending at an interest rate of zero, and another claiming that the bridging market is worth more than a gazillion pounds.
At Montello, a large source of our business comes from brokers that have been let down by another bridging company. There are various reasons for this. The primary reason is because the broker is struggling to get the deal placed in a timely manner. Another key issue seems to be that the terms initially offered (or advertised) are not what the borrower is going to get when it comes to the day of completion.
We know that the FSA has raised various concerns with regards to bridging finance recently, and it seems that one of their primary concerns is with regards to transparency. This was certainly the case with their recent statements on the calculation of ‘retained interest’. It wasn’t that lenders were charging on a retained interest basis, it was that borrowers were not getting what they originally thought they were getting.
We recently had a transaction come to us, after it had been with another bridging finance company for a number of weeks. The last straw was when the lender (after offering the borrower terms and had progressed to legals) required the borrower to provide bank statements going back three months. This itself wasn’t necessarily the problem. The problem was that the lender was requiring that the borrower’s bank manager personally certify the three month’s worth of statements.
Come on guys, that’s not commercial bridging finance is it? That sounds more like a requirement for a straightforward bank loan.
The reality is, there are some bridging finance lenders in the market that are not only being misleading with the offering they are advertising – the truth is, many are not even providing a true bridging finance offering. Bridging finance is meant to be finance for a short period of time, and that is provided quickly. If a lender is not able to perform quickly, then its simply not bridging finance.
Lenders that over promising and under delivering, are good for our business. The borrower or broker ends up coming to us and getting a ‘real bridging loan’. However, having lenders in the market that are misleading borrowers, is bad for the industry and its perception as a whole.
