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Adaptability is key to survival in the bridging world, West One MD advises

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  • 23/05/2016
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Adaptability is key to survival in the bridging world, West One MD advises
Bridging lenders need to adapt to survive and move into areas like commercial and development finance that have been neglected by high-street lenders, according to a senior industry figure.

Many bridging firms went out of business when the recession hit because they weren’t flexible enough with their products, said West One Loans managing director Stephen Wasserman, adding that remaining lenders in the specialist area have had to appeal to a wider range of borrowers.

“Short-term finance providers have diversified into new areas which have been neglected by high street lenders,” said Wasserman.

“For instance, the commercial property sector has suffered from a vacuum in funding after banks became reluctant to lend to such borrowers. While commercial property prices have shot up 21% since their trough in 2013, high street lenders are still only lending about half as much they did in 2009, according to MSCI (real estate).”

He said short-term lenders have stepped in to fill the void and have subsequently been reaping the rewards of the market’s revival.

“Small businesses also suffered from a shortage of finance after the recession, with many companies suffering from liquidity problems. The fast-paced nature of bridging loans has enabled businesses to make the most of the opportunities available to them by allowing them to make purchases they need to as quickly as possible,” said Wasserman.

He said property developers have also begun looking to bridging finance to purchase run-down residential properties in need of renovation to bring them back on to the market.

“High street banks are often unwilling to lend enough capital to cover both the cost of buying the property and the renovation, based on the value of the property once it has been finished,” said Wasserman.

“However, bridging loans are particularly useful for these projects due to their flexibility, with many buy-to-let developers not wanting to be tied down to the long-term commitment that accompanies traditional forms of finance, as well as needing access to funds quicker.”

The West One Bridging Index found gross annual bridging lending expanded from £700m in 2010 to £2.5bn at the end of 2015, a five-fold increase, which Wasserman attributes to “adaptability”.

“While lenders can still provide the ‘bread and butter’ loans for property purchases, the increasing diversity and flexibility of bridging loans ensures the short-term finance sectors expansion will be sustainable. However, in bridging it will always be a case of ‘survival of the fittest’,” he said.

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