"There are some perceptions – which I would say are misconceptions – about bridging, that perhaps puts brokers off looking at bridging as a solution for their clients."
Is this finding a shock? Not exactly, considering many commercial businesses, especially those in the retail and hospitality sectors, were in a state of flux last year.
Nevertheless, it’s not all doom and gloom, as the findings made by NACFB also highlighted that commercial property investments are one of the key areas brokers anticipate to grow this year.
So, where does this leave the specialist lending industry in terms of helping investors in commercial businesses to make the most of opportunities in 2022? Despite growing significantly as an industry, bridging finance is still often overlooked and misunderstood, with many brokers still unsure of how their clients can use the sector’s potential.
In 2022, it is pivotal awareness of the industry continues to grow and more brokers recognise the variety of situations this type of short-term finance can assist with.
The most obvious reason to use a short-term loan – and perhaps what most people think about when they hear the word ‘bridging’ – is to break a chain in a residential property transaction so someone can buy a property before the existing one is sold. However, bridging extends beyond this and has an important role for investors and developers. For example, investors who are looking to purchase and refurbish commercial property. This can often be difficult and long winded which is where specialist short- term loans become the most viable solution.
Bridging lenders are usually able to provide finance much more quickly than mainstream lenders, often in a number of days rather than weeks or months. Most bridging lenders can also be much more flexible as loans tend to be underwritten individually, meaning they can consider individual borrowers’ circumstances. It also means they can lend on those more complex cases which mainstream lenders often reject. This is key for investors and developers who are looking to make the most of commercial investment opportunities.
However, there are some perceptions – which I would say are misconceptions – about bridging, that perhaps puts brokers off looking at bridging as a solution for their clients. The principal reason is the notion that bridging is an expensive option and should therefore be seen as almost a last resort, when in fact it should be considered as a first-choice solution.
In reality, rates have fallen dramatically over the past few years, so are now considerably lower than they used to be.
Because bridging loans can be completed much more quickly than in the mainstream lending market, this can make all the difference in terms of a property transaction going through or getting a property into a position where it can generate a return to the borrower much more quickly. In these cases, it may well end up being more cost-effective than waiting for a more typical type of borrowing from a mainstream lender.
Ultimately, many commercial businesses have faced very difficult and challenging times in the past two years. However, as we are starting to feel cautiously optimistic that the Covid-19 pandemic is now entering its endgame, there now need to be opportunities to enable businesses of all types, especially those in retail and hospitality to bounce back and thrive.
This is why we agree with all those brokers who have predicted the number of commercial property investment enquiries will spring up in 2022.
With that in mind, I would encourage brokers who are new to bridging, or who may have pre-conceived perceptions about the sector, to learn more about it, or seek out a specialist broker to support their offering to their clients, when looking for a suitable option for those with commercial property investment enquiries.
