An almost forensic examination of the details of a proposed bridging loan is more likely to ensure a successful undertaking, according to John Hardman, head of sales at Bridging Finance Solutions (BFS).
And to help clients understand the process more easily, Hardman has put together a guide outlining what he sees as best practice when it comes to preparation.
We all know a well thought out proposal is key (whether it is development or auction purchase) and Hardman points out that applicants who scrutinise every last detail tend to enjoy a smooth process.
He says: “Those who have studied in depth not just the purchase but the following 12 months plan in detail are typically the ones where we have the best outcomes for all parties.”
When it comes to a credible exit strategy, it goes without saying that ideally exit is sale, and Hardman agrees, adding: “If that’s the case then great but this in all probability will not happen within three months, making default on any short-term bridging finance arranged a real possibility. At BFS we try and arrange all facilities over 12-18 months to give the client maximum flexibility.”
Another aspect to consider, says Hardman, is honesty, which sounds obvious but as a principle lender the ability to provide very quick (and accurate) decisions is based on the information provided.
He explains: “If there is adverse credit or a ‘story’ behind a deal we are very relaxed about this and can act commercially to overcome these but we do need to see these factors at the beginning rather than part way through.”
Adding insight to the process, he says it is important to consider the cash stake, pointing out that whilst additional property can be used to enable 100 percent funding on some cases, it is always wise to have flexibility in the form of cash should the path not run true to plan in the coming months.
Having on your side an astute professional team is vital, says Hardman, as is employing a decent solicitor. “Where property development is concerned, a client’s direct experience is not crucial to us at BFS, but we always like to see a strong team surrounding them which will ensure the project is a success,” he reasons.
“And a client needs to ensure that their solicitor is active in the short-term bridging and development market, this ensures a timely execution in the most cost-effective manner.
“Also, a knowledgeable broker is key. Where a client intends to use a finance broker for their proposal it is always worth checking that the broker is well drilled in short-term funding, this means being proactive from the initial enquiry through to assisting both lender and client when it comes to the legal process.”
Hardman goes on to highlight the importance of due diligence, as well as a level of trust that comes with a personal service.
He says: “At BFS, we continue to streamline our processes and ensure our due diligence is not too onerous. That said a client will always need to have documents to hand such as proof of cash stake, ID and bank statements so it always makes sense to organise this early on in the process
“We ensure that the client or broker has a dedicated point of contact and we will meet, where possible, each applicant. The ability to transact with a person directly ensures that there is a level of trust very early on in matters and avoids frustration from a client’s perspective.
“It is essential that any bridging loan or development loan has absolute clarity from the get-go, we have the ability to make credit decisions instantly for a bridge and in respect of development we ensure that 100 percent of development costs can be covered after fees and charges before we push forward - we would never enter into a contract that looked likely to fail or fall short.”