This is a big consideration for bridging lenders as it means that it can take borrowers longer to secure an exit and consequently the standard length of a bridging loan is now creeping up from nine months to 11 or even 12 months.
As lenders are tending to hold assets on their books for longer, they are taking a more rigorous approach assessing applications and the timeframe of a bridging process is lengthening.
It is currently the norm for a bridging loan to take between six and eight weeks to complete from application and it’s not unusual for an application to take months.
Longer applications, higher risks
It’s important that brokers understand this situation at the outset so they can manage the clients’ expectations, but also so they can mitigate for the risks presented by a longer application process.
The longer it takes for a case to progress from application through to completion, the more opportunity there is for circumstances to change.
We have seen cases recently where lenders have stopped lending on new business and have also failed to honour their pipeline.
This can be stressful and potentially expensive for borrowers and it puts brokers in a very difficult position.
Brokers must conduct their own due diligence
So, certainty of funding is an increasingly important consideration when it comes to choosing a lender.
The market is awash with choice, with many lenders offering attractive rates and criteria, but not every lender will have robust and consistent funding models.
Brokers need to do their homework and be careful about which lenders they pick – certainty is a key consideration for both them and their clients.
It reminds me of the utilities market, where competition has flourished, and consumers have been encouraged to switch provider in the hunt for the cheapest rates.
The problem is that not every provider has had a robust business model and some of these companies have folded, resulting in their customers losing out.
The pace of the bridging market is changing, to enable lenders to carry out more rigorous diligence on potential borrowers, and brokers should also carry out their own diligence and ensure they choose a lender they can trust to deliver clarity and certainty.