Bridging lender Fincorp has put together ten top tips for brokers new to bridging and who are looking for a lender.

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1. Know your customer

All brokers know that before you even start to choose a lender,
the most important thing is to understand your customer and
their needs. We operate in an increasingly regulated environment
and that means doing your due diligence on what type of product
is right for your client. Bridging can look like the answer when
borrowers are caught short, but it shouldn’t be seen as a quick fix.
Make sure that short-term funding is the right option for your client
and their circumstances.

2. Know your regulatory obligations

As Consumer Credit Act regulation came under the Financial
Conduct Authority’s auspices earlier this year, it’s even more
important to make sure you document why you’ve advised your
client to take the product you’ve chosen. It’s good practice to write
down why other products weren’t the right option to justify why
bridging was the right choice.

3. Assess the options

Many mortgage networks have relationships with bridging lenders
and will have a preferred panel of providers. Most won’t stop you
going off panel though if you find a better option for your client.
That said, while there are a lot of large and professional bridging
lenders in the market, there are still smaller and less experienced
players out there. Be very sure of whom you’re dealing with and
their reputation.

4. Proc. fees

Proc. fees in the bridging market are a lot higher than in the
residential market and can range between 1 and 2% in some cases.
Be wary of falling into the trap of being seduced by one lender
offering a bigger slice of the pie – you have to be able to justify
why that lender was the best option for your client, not you.

5. Do the maths

There is no standard way of calculating interest in the bridging
market. Some lenders charge simple interest, others compound,
others charge compound on the compound. Because borrowers
tend to roll interest payments up into the capital and repay
in a lump sum at the end of the term, details like this can be
overlooked. But they can be details that end up costing tens of
thousands of pounds in some cases. Make sure you are really clear
about how the interest is calculated before signing your client up.

6. Read the small print

Fincorp has been campaigning in the bridging industry to stamp out
unethical and extortionate fees. But there are still lenders who lend
to borrowers on the assumption that the borrower will default on
their terms, allowing the lender to slap them with backdated fees
that can eliminate clients’ capital. Be sure that your client takes a
loan for the right term and that you’re dealing with a lender that is
up front about the fees it charges, how it calculates those fees and
when it will charge them.

7. Use a solicitor that has done bridging before

Bridging is designed to be fast. Clients use it for that precise reason,
so the last thing you want is for a deal to get stuck in legal. And
invariably, that is where it does get stuck. You can minimise that
likelihood by using a solicitor who is experienced in dealing
with bridging lenders and who is comfortable working to their
deadlines. Bodies such as the Association of Short Term Lenders
and Association of Bridging Professionals should be able to
provide preferred partners.

8. Get advice

The Association of Mortgage Intermediaries is a good port of call
for advisers who haven’t done a lot of bridging in the past and
want to do more. They have advice on how to ensure that you
don’t fall foul of any of your regulatory obligations when straying
into unregulated territory. The National Association of Commercial
Finance Brokers also has a lot of information on the sector and
is worth a look, particularly because it sets certain professional
standards for its members operating in unregulated markets.

9. Get busy

Like anything, the brokers who are most successful in bridging
are the ones who develop strong specialist experience. From
the outside bridging may appear complicated but it provides an
invaluable source of finance to property professionals across the
UK. The value is in getting it right, and that more often than not
depends on relationships, skill and experience. If you want to do
more bridging, develop relationships with key partners who you
can trust and bring a volume of business that allows those
relationships to build strongly over time.

10. Keep it clear and simple

At Fincorp our approach to lending is summed up in two
words – Clear and Simple. We believe that bridging should
be a straightforward business, and we work hard to make your
dealings with us as clear and simple as possible. Just a
straightforward competitive flat rate for the period of the loan –
it’s a simple and transparent as that. We offer a straightforward
competitive flat rate for the period of the loan, and we pay a
healthy introductory fee on completion of the loans.