Bridging

Bridging lenders urged to 'play to their strengths'




Bridging lenders have been warned about the risks of expanding into other areas of finance as the market becomes more saturated.

Towards the end of 2016, the Association of Short Term Lenders revealed that the total value of bridging loans written in Q3 had fallen 4% on 2015’s figures.

Bridging lender MTF also found that just 13% of brokers were reporting a rise in bridging loan volumes towards the end of last year. 

Therefore, as the bridging market looks to be reaching saturation point, it has been suggested that lenders could diversify into other areas of finance.

However, those within the bridging industry have told Bridging & Commercial that lenders need to have an area of the market they specialise in to be able to create a niche which helps them stand out.

“The modern specialist lender has to do everything well” 

Sam Howard, COO of Regentsmead, said that 2016 saw a flood of new players enter the bridging market and felt the increase in competition had led to innovation and choice for customers.

“However, a crowded market can lead to a race to the bottom in terms of higher risk and lower returns. 

“Lenders need to play to their strengths and simply do things better whether, for example, that is using technology to improve the customer experience, or using their years of expertise to offer the customer added value.”


Fintech may play a more prominent role in bridging during 2017

D’mitri Zaprzala, head of sales at Octopus Property, felt the key to competing in a crowded market was to have innovative products that were competitively priced and solved specific client problems.

“If you understand the market you’re in and the different finance solutions borrowers are looking for, you should always get a degree of traction and be able to carve out a niche.

“But price, in this day and age, isn’t everything.

“The modern specialist lender has to do everything well, not just some things well and others OK.”

“Most bridging lenders have an area of the market that they specialise in”

Scott Marshall, managing director of Roma Finance, felt that service would be a key differentiator in 2017 as lenders looked to gain more business in a growing market.

“It'll continue to be vital for lenders to fully understand a borrower’s needs and assessing the viability of their project will become even more important. 

“A lender’s expertise will be the new currency that introducers and their customers will be buying.”

Jonathan Sealey, CEO of Hope Capital, felt that always delivering on what you say you will and genuinely being excellent in that niche was key, otherwise a lender risked getting a less than desirable reputation. 



Do bridging lenders need a niche in order to maintain market share? 

“Most bridging lenders have an area of the market that they specialise in, be that geographic, the types of property that they lend against or being known for elements of service. 

“By excelling in those areas, you automatically create a niche.”

“For a lender to succeed, it is crucial that they offer a consistent product offering”

Mike Strange, managing director at Funding 365, said its niche was providing loans at prices that compete with bank funding, at a speed that could not be beaten.

“For a lender to succeed, it is crucial that they offer a consistent product offering which brokers can have faith in.  

“Where a broker loses faith that a lender will consistently respond to a specific type of enquiry, then that relationship is forever weakened.”

Paul Wertheim, operations director at Mint Bridging, felt that lenders venturing into new areas of finance could not only expose themselves to additional legal headaches, but also be perceived as scattered companies who spread themselves too thin, which can create doubt to a potential client. 

“The rule of thumb is to be excellent at one thing and then gradually expand. 

“By leaping into new financial areas head first, this can be the ultimate downfall of their business.”

“The mistake some bridging lenders make is trying to do too much”

Sam said Regentsmead had seen first-hand the perils of unsuitable lenders entering the development finance space, saying it required a huge amount of experience. 

D’mitri added that all too often lenders without the requisite experience and skill enter an entirely new sector just because they have succeeded in another. 

“The mistake some bridging lenders make is trying to do too much and branch out into areas of finance that they don’t really understand or have enough experience in. 

“You have to know a sector inside out, and understand all its nuances, before you step foot in it.”

Jonathan concluded by saying that it did make sense that lenders looked to diversify as the market became more crowded.

“It is sensible then to broaden your lending into other associate areas that you have knowledge of.  

“The danger lies if a lender strays too far from its area of expertise, as if the lender no longer knows where the pitfalls are, then they put their whole business at risk by inadvertently lending on properties and to people that cannot or will not repay.”

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