Bridging loans: brokers and lenders working together

Please ignore the sexist heading of this piece and definitely include the girls and the women, because our industry includes some very talented ladies and month by month their numbers are growing. Boys, girls, men or women, there are great opportunities in the short-term lending industry for us all.

However, to maximise these opportunities, the broker community, an amazing  group that feeds deals into the system, will fare better by working more closely with lenders, and vice versa. With few exceptions, there is a need for working closely together, to understand each other better, and it is this that ‘separates the men from the boys’.

Those lenders that believe they do not need a close relationship with their introducers should shut up shop now! Lenders need brokers just as much as brokers need lending sources – and this is true for firms large or small, those handling the occasional enquiry, or the organisations totally focused on the short-term market. Together we are stronger!

But what does working closely together mean? One example is co-operation. The best meetings are held at round tables, so that all parties sit side by side with no “them and us”. For lenders and introducers it should be no different. Let us analyse what each needs of the other.

Brokers’ requirements start with respect – respect from lenders and recognition that they identify the opportunities which fuel our industry. Respect includes providing prompt service and that is a given, but alone it is not enough. Processing those loans which tick all the boxes is simple but “working together” comes into play when a proposal should be acceptable but does not quite meet the lender’s criteria. Then, what can be done?

For example, a down valuation occurs because the borrower’s enthusiasm is greater than the valuer’s. Generally, cutting back the loan leads to the opportunity being wasted. However, can the LTV be extended a little? Is there income which can be proven so that all or part of the interest retention can be waived? Perhaps there is another asset where a second charge can be taken. None of this will be discovered without the lender and broker “working together”.

Another instance is term loans if the ability to service the debt cannot be adequately proven at the outset. It may be a small hotel, a B&B or student accommodation where the income needs to be established. In this situation, a listening lender, if it believes the income will be proven during the first year or so,  could build in an interest deposit account to supplement the cashflow until the property is self-supporting.

It is very common for brokers to request an existing valuation to be accepted where the valuer is not on the lender’s panel. Instead of rejecting the request, a lender could consider if it is possible to add the valuer to its panel. Of course, there may be circumstances where this is not possible, for example a poor previous experience, but overall there will be many occasions where unnecessary duplication of expense and delay can avoided.

But “working together” is not just one way; introducers need to step-up as well. If brokers act as a post box, passing on unqualified enquiries, they must not be disappointed when lenders show little enthusiasm. The brokers who review the proposal, gather together all the information and supporting documents and present the opportunity in a coherent, well-argued way will attract lenders’ support, not just for the proposal in hand but for future opportunities.

By all means, if necessary, first talk through the generality of the enquiry with the lender before committing time to a detailed application, but then give it your best shot. A short precis supported by basic documents or links to o-line information will speed up the process and avoid delay while questions are asked. Brokers seek Heads of Terms to be issued as soon as possible and this is the way to achieve it.

Many bridging brokers now include development finance in their armoury and here lenders will particularly appreciate a well-researched enquiry. Provide them with the appraisal and cashflow forecast, a copy of the planning permission or a link to the portal, explain how construction will be procured and make clear what experience the promoter has as a developer by providing details of other recent projects.

Not all introducers will have detailed knowledge of all classes of loans, and this is particularly true regarding development finance. Do not be embarrassed, be prepared to ask your lenders for help – listen and learn.

My company, Alternative Bridging Corporation, has recognised the need for further education, and we have established the Alternative Academy to assist our staff extend their knowledge. To help introducers to work more effectively with us, we will invite the broker community to participate with them in short but focused Zoom meeting on issues we identify as needing explanation. These tutorials will include explanatory papers which will be hosted on our website.

One of the most important factors in working together is communication. Whereas email is a great way to move information and documents from our party to another, I truly hate email when it is used for questions and answers as it does not provide for meaningful discussion. Far better, use the telephone, or best of all if it is impractical to meet, use Zoom or Teams for face to face discussion. It saves time and avoids misunderstandings.

So, going forward, co-operation and communication is the answer, it separates the men from the boys.

Click here to read the article in the July issue of Bridging Introducer.