Finding the right funding partner for your customer requires due diligence, says Scott Marshall, founder of Roma Finance
There’s been a large rise in the number of new bridging lenders over the last five years and the increased competition is good news for borrowers and brokers alike.
However, lenders range from big banks to one- or two-man bands and can take very different approaches to lending and service, so how do you choose the right one?
Doing your own due diligence on potential bridging lenders can give you confidence in your recommendations.
Here’s how to do it:
Do your detective work
Research your lender, especially if it’s the first time you’re recommending them.
You can do this in many ways, from looking at social media for reviews to reading comments in forums, to give you a flavour of how they behave.
It is also important to understand the level of defaults the lender has, too, because that tells you a lot about how it, not only underwrites but also how it treats its customers after lending the money. Don’t be afraid to ask lenders directly about what happens if something goes wrong.
Ask for recommendations
Real-life recommendations from other brokers are worth their weight in gold when it comes to choosing a bridging lender, so communicate with your industry peers.
Speak to other advisers, locally, online or at events to see which lenders they recommend (and which they don’t).
Look at the leadership
Understand who is running the lender. For example, have they got a background in lending, property development, managing hedge funds or maybe something else?
Lenders should always be happy to tell you. The management team at Roma has extensive lending and property development experience. Our absolute priority is to help borrowers redeem their loans on time by creating wealth from property. Plus, we have the practical experience to help them overcome any challenges.
How are they funded?
If you choose a lender with multiple funding lines from institutionalised banks and building societies, you have more confidence their funding is secure.
At Roma we have nine diverse funding lines, from a building society to a syndicate of banks as well as the British Business Bank, giving us more flexibility to lend as well as stability of funding. Just imagine the amount of due diligence that’s been carried out on us, to be able to secure those funding lines. This should provide a broker or borrower with a large degree of comfort.
If the lender has just one or two funding sources, I would be cautious. We’ve seen how quickly funding markets can dry up, especially in challenging economic conditions.
How fast can they give you certainty of offer?
Speed is really important to borrowers, because knowing they have funding in place allows them to secure a property and start planning their project.
Look for lenders that are upfront about their current turnaround times (SLAs) and have processes in place to give you certainty of offer as quickly as possible.
Membership of a professional body
Is the lender a member of a trade association? This can give you a good steer about its professionalism and commitment to raising industry standards.
Look for membership of the Association of Short Term Lenders (ASTL) or lender partnership of the National Association of Commercial Finance Brokers (NACFB) or Financial Intermediary & Broker Association (FIBA) and membership of the Lending Standards Board (LSB).
How good is their service?
Good service is hard to judge before you’ve actually worked with a lender. But feeling valued from the outset is a good start.
Are the phones being picked up quickly by knowledgeable experts and do you feel like an individual, not just a case number?
Having a dedicated point of contact who knows the case is important too, as it frees up your time to get on with helping customers. Ask the lender if you will have one point of contact and their direct number.
Bespoke underwriting and structuring on complex cases
If your customer’s case is complicated you want a lender with experience in structuring loans to meet the needs of the project, not just offering an off-the-peg solution.
Ask if they offer bespoke arrangements that they can structure after getting under the skin of the project. Not all will be able to do that, but it could be useful for your complex cases.
A focus on exit strategy
The best bridging lenders look for a clear and realistic exit strategy before approving a loan. At Roma we won’t lend on a project that doesn’t have a robust plan, costings, schedule of works and exit strategy, and neither will other reputable lenders. It’s a big red flag if your lender isn’t asking questions about your customer’s exit strategy.
Clear, fair and transparent fees
Ensure that fees and charges are fair, transparent and understood by both you and the borrower. Look for lenders that are upfront about all fees, including those charged if your customer cannot redeem in full and on time.
Finding a reliable, consistent and competitive bridging lender helps borrowers form a successful relationship for their property project, so it makes sense to put in some work to get it right.
Visit our website at https://romafinance.co.uk/ to find out how we can support your next property project.