Many brokers don’t deal with short-term finance companies on a regular basis and, understandably, are not used to the way lenders like us think.
With this in mind, I thought I’d give an insight into what we look for in deals and require from brokers so that they can approach us as prepared as they possibly could be.
This means that deals are not only more likely to go ahead but that they will come together more quickly.
Questions, questions
So what’s the first thing we do when a case lands on our desk? We start by stripping cases down to the basics and asking a number of fundamental questions.
What type of property is it and where is it?
Our key security is the property and therefore we really need to understand it.
Ultimately, is that property right for that area? We take a look at the valuation and look at the comparables.
For example, a 10,000 sq ft mansion might be right in Chelsea, but not in Salford. A 15,500 sq ft block of flats might be perfect for Wolverhampton but not right for rural Surrey.
What’s the borrower like?
Have we got all relevant information about the borrower’s assets and liabilities and does this person have significant net asset worth?
If the loan is for a refurb or development, has the client had previous experience that they can evidence? It all makes a difference and can help the application considerably.
What’s the size of the loan?
Why does the borrower need that amount of money? Are they justified in asking for that amount? Are we paying off another loan and releasing money to do works?
If so, can the prospective borrower provide a schedule of works that matches the amount of money being released?
What’s the term of the loan?
No one should borrow a short-term loan for longer than they need to, but even worse is borrowing for too short a time and needing an extension.
We like to work with borrowers who leave nothing to chance and don’t give themselves unrealistic deadlines. Have they worked out how long will be needed until the exit can realistically be obtained?
For example, a light refurb followed by a sale might need three months for the works followed by six months for a sale.
Lenders are considerably more disposed toward realistic borrowers.
What’s the exit route?
The exit, it goes without saying, needs to be plausible and any evidence to back it up will help the applicant’s case. If we feel that there is a lack of clarity about the exit, it’s a big red flag for us.
Together, all these questions amount to one key question: does this deal make sense?
Information is key
When brokers have come to us prepared, we’ve taken deals from application to completion in less than two days. We did one deal recently of £840k in less than four days.
The information you need to present us with at outset includes a completed application form, a valuation and building insurance with lenders’ interest noted.
Each lender clearly asks for different things but at Dragonfly we also need photo ID for each applicant, two utility bills less than three months old and, for 50%+ LTV loans, a copy of three months’ bank statements.
Get all this information ready at outset and you’re showing you’re a serious borrower.
One other thing: throughout the application, what’s also crucial is that you don’t hide anything or brush anything under the carpet.
It’s better that we know about any potential issues up-front rather than uncover them further into the underwriting process.
That way we can deal with them and look to work around them.
