What every Bridging Loan Broker Wants!

As a bridging loan lender with over 30 years’ experience, I thought I knew what a bridging loan broker wants but as times go by priorities change, so a fresh look is always in order. If we do not give our bridging loan brokers what they reasonably want, another lender will!

A Bridging Loan Broker expects high quality of service from the lender; in practice, what does this mean? Lenders must be able to review new proposals and issue Heads of Terms in hours, not days. However, to do this it is essential for the bridging loan broker to provide adequate, accurate information as without it, either delay will occur or guesses will be made and terms may need to change at a later date and no one wants that!

Bridging lenders’ underwriters must have a smooth process for instructing valuers and solicitors. Although the choice of valuer for private dwellings is often successfully sub-contracted to a valuation platform such as Method, this is not always suitable for commercial assets and development finance. Here the lender needs close working relationships with its professionals and to know which valuer is best suited for the instruction and has capacity for the work.

The Bridging Loan Broker is driven by the demand and need to satisfy their clients’ wishes and in doing so, their personal requirements will also be fulfilled. Recent research by Ernst & Young’s financial services subsidiary, EY, confirms that number one is strong relationships – so what is it that lenders must do to create these relationships?

The EY report identifies speed of execution as the most important element in choosing a bridging lender. However, of EY’s respondents, 30% reported completion times for bridging loans of 35 to 40 days and a further 32% recognised 40 to 45 days. Brokers and lenders alike, want and need this timescale to be reduced, so what can lenders do to achieve this?

One solution is obvious – to be adequately staffed, to respond immediately and to be on top of the process. This is not always the case with the new, smaller lenders. Secondly, one to one discussion is far more effective so we must be willing to engage with our introducers by ‘phone or Zoom rather than by email. Also, working from home is not an excuse for poor service – brokers expect and deserve better.

The due diligence process cannot be allowed to delay completion. Certainly, solicitors and valuers need to complete their tasks but to enable them to do so, the broker must be skilled in obtaining and supplying the necessary information and the lender must perform like the polished conductor of an orchestra, ensuring all the members are in harmony. Brokers need bridging loans to complete quickly which is confirmed by our own experience at Alternative Bridging. Achieving it needs dedication and co-operation and brokers reward lenders who provide this and avoid those who cannot.

Loan to value (“LTV”) has always been an issue but more recently brokers’ requirements and lenders’ aspirations appear to have come together. This may be because borrowers’ requirements have become less demanding or more likely that property values have risen sufficiently to satisfy them at a lower LTV. But brokers do need lenders to be supportive when there is a down valuation, for the lender to increase the LTV from say 70% to 75% so that the opportunity is not lost. In a word, flexibility.

Surprisingly, pricing of loans has become a less significant factor in brokers’ choice of lender. This is partially due to bridging loan interest rate compression among the larger and more established lenders and the recognition that a 10 basis point reduction is of no value if the proposal is not completed.

Reducing bridging loan interest rates and enabling introducers to be competitive is important but we believe certainty of completion is more significant for our brokers and their clients. Both must be treated fairly with transparency with detailed Heads of Terms which identify all the bridging costs and terms. And woe betide the lender who makes promises which cannot be fulfilled or changes the terms at the last minute or, worse still, fails to deliver. This behaviour cuts deeply and the wounds do not heal quickly and will deter further opportunities being introduced by the offended broker. Introducers want reliability.

A recent trend is the recognition of the importance of relationship management. This has grown as brokers appreciate more and more the value of repeat business. Having performed well for the borrower with the bridging loan, why would the borrower go elsewhere for the refinance? Creating this relationship depends upon the lender being responsive and constructive as otherwise it will reflect badly upon the introducer.

Similarly, a wide choice of products helps our brokers to have a “one stop shop” where they can start with a bridge or overdraft, include a refurbishment loan facility and transfer to a term loan.

And finally, back to strong relationships. A strong relationship between bridging broker and lender is the key to good business and it is not only what brokers want, but it is equally important to us lenders. No one factor will encourage an introducer to favour a particular lender but the combination of speed of execution, flexibility and a wide range of product, competitive bridging loan interest rates and LTVs and most of all, trust and reliability, are the foundations for strong, enduring relationships between brokers and lenders.

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