As a packager specialising purely in bridging loans, we are often presented with cases that have already done the rounds with a number of lenders, which reduces the chance of a loan being made.

That’s why it’s important to get it right first time, especially if your client is an active portfolio investor who needs liquidity and lenders onside.

But how do you get it right?

In bridging, as in many areas of life, it’s the small details of the deal that matter in the way you present a case to a lender. If you get even a few things wrong or give out the wrong kind of messages, you will be turned down.

In our experience, the areas brokers tend to overlook or most commonly make mistakes in during an application are:

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1. Not knowing what LTV or fee is acceptable to the lender
2. Not knowing how to structure a deal in ways that make it work
3. Providing incorrect / insufficient information
4. Providing too much information (yes, it can happen)

Certain experienced brokers, of course, will be more than capable of going direct, have the time to do so and understand the quirks and requirements of the short-term lenders.

However, what about those brokers who don’t have the time and aren’t familiar with the bridging market? One option is to use the services of a packager.

Why use a packager?

We’re often asked by brokers why they should use a packager rather than go direct? Firstly, there are the mistakes above that are commonly made, which can have serious ramifications for their clients.

Secondly, there is the time and effort that a broker has to put in if they go direct, especially for more complex applications.

Thirdly, because of the close relationship packagers have with lenders, they are almost always able to bring added value to the broker.

For example, it may be that the packager can persuade a lender to stretch an LTV or ask it to accept a valuation from a valuer that is not on its panel. Also, in many cases packagers will have access to exclusive products and rates that are unavailable elsewhere.

In addition, the trust between the packager and lender can make all the difference. A deal that might be turned down direct could be approved if the packager backs it.

From the broker’s perspective, a packager effectively acts as an initial ‘underwriter’ on a deal, as he or she will usually know almost immediately whether a loan will be offered. This can offer peace of mind to brokers, as they will know almost immediately whether their client will get the green light.

What do packagers charge?

This will vary from packager to packager and different ones charge in different ways. For example, one may want a percentage of the broker’s fee, another may want a percentage of the procuration fee. In our case, our fee comes directly from the lender.

How the chain works

To give you an idea of how packagers work, acting as the link between the broker and the short-term lender, here is a case we dealt with recently.

One of our introducers, Adrian Dadds of St Georges Finance, a broker specialising in commercial finance, approached us with an urgent request from one of his clients.

The client was a businessman who had his own successful business and was also a keen property developer. He was in the process of purchasing another property in a prime location in central London, which he was going to refurbish and rent out. The property itself was in a very prime location and, due to its current state of repair, was an excellent investment opportunity. He had placed a deposit on the property, so was already financially committed.

As is all too common in the current climate, the lender that had originally agreed to finance the purchase decided to change its lending criteria out of the blue and said it no longer wanted to lend at this level.

The purchase price of the property was £3.2m and, even though the client had committed a substantial deposit, he could not access the remainder of the monies quickly enough from his other investments, which were held offshore, to avoid losing the property and his deposit.

Even though time was against us, we were able to secure a facility for him based on the information that we had. With our relationships with both Dragonfly Property Finance and the surveyors, we arranged for the valuation to be carried out that same day and we received the report the following morning.

Meanwhile, with the help of Adrian, we collected all the other necessary information that we needed and were able to have everything packaged for Dragonfly’s solicitors within 24 hours.

With both Dragonfly and the client’s solicitors understanding the urgency of the case, they were able to work together and complete all the necessary legal work in time for the client to purchase the property within the terms of the contract.

Adding value for brokers

I would argue that packagers remove a major headache for brokers and save them a lot of time scouring lenders for deals and getting all the necessary paperwork in place.

The fact that packagers can really speed deals up for the client and get near-instant decisions will reflect well on the broker, too. And if you’re getting the exact same money for far less work, what’s the downside?

Yousouf Roze is director of First 4 Bridging