By Brian Rubins, Executive Chairman, Alternative Bridging Corporation.
In a crowded market, gaps are not too easy to identify but they do exist and satisfying the more difficult to fund loans in times such as these, separates the men from the boys. This applies to introducers as well as principal lenders and widening the offer is far more profitable than fighting for scraps in an over provided arena.
Development finance was traditionally the product of the High Street banks, but as they become less and less open to new customers, they have created a gap for the challenger banks and bridging market to fill. As some have found to their cost, development finance is not as simple as it looks. But for those intermediaries who have the skills to analyse the planning, construction and sales risks, and identify the funds to lend, there is an immense opportunity to create continuing relationships as residential developers need to finance their ongoing programme, site after site after site.
Understandably, lenders’ product offers are driven by funding availability and so if the wholesale funder is not authorised, and many are not, the bridging lender will not have the funding to offer regulated loans. In turn, the broker needs to be authorised or to work with one who is. Accordingly regulated loans offer another gap in the market. There is nothing new about regulated loans for these reasons, it is an underprovided space offering meaningful benefit for those authorised to operate in it.
Great opportunities exist for regulated development or refurbishment loans, facilities for borrowers who wish to construct or extend a property they have previously occupied or where they plan to do so on completion of the project. To offer these facilities, the lender first needs authorisation and then the skills to manage a construction loan. Not many have both.
Suitably authorised lenders can offer a facility to finance the construction as well as a loan for the purchase where the property is not already owned, or a loan to repay an existing mortgage where it is, and the total loan can be up to 100% of cost, providing that remains within 65% of end value. Not many lenders operate in this market even though often borrowers are “high net worths” with a team of professional advisers and a reliable contractor to ensure the project runs to plan.
ALTERNATIVE Bridging identified more than a gap, a great big hole, when they introduced their “Overdraft” product, a facility which enables borrowers to establish a maximum loan secured by an under-utilised asset against which they can drawdown and repay, time and time again. It is ideal for developers and property dealers as well as the business community providing on-call loans, with interest paid only on the balance outstanding.
The short-term lending market is innovative and will keep identifying opportunities, gaps in the market to fill. While the market is in turmoil, learn the skills, fill the gaps and enjoy the rewards.
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