BFS on course for £25m lending in 2019
The lender told Specialist Lending Solutions it was aiming for, and on target for, £25m of new loan completions in 2019.
Earlier this month it announced a 31 per cent increase in sales for the second quarter of 2019 compared to the same period last year, having completed four straight years of 25 per cent year-on-year growth.
As part of its plans the lender said it would continue to rely on retaining “personal and localised relationships” with its brokers.
The Merseyside-based firm will maintain its focus predominantly on the Northern market, sub £1m loans and the development finance sector.
BFS head of sales John Hardman said: “Our operation and external profile has undoubtedly been built around our people, and in a sector that can often appear faceless and centred around figures and interest rates, that is incredibly important to us.
“I recognise the importance of owning an identity as a lender, an approach or set of behaviours that set you aside from the rest.
“I firmly believe my team has that and our historic results show that to be true. The key is maintaining that high level of consistency and delivery to ensure we are a lender of choice for many brokers.”
Accelerating a bike dealership’s growth with a bridging loan – exclusive case study
Bridging Finance Solutions managing director Steve Barber reveals how the lender was able to help a start-up business get on the fast lane to success.
This was one of our most unusual deals to date, providing a short-term loan to a garage forecourt owner looking to acquire a number of imported motorbikes.
The private client was keen to expand his business and offer more motorbikes for sale, but needed a cash injection to facilitate this.
The business had only 12 months trading history and was unable to secure a stocking facility or overdraft with its own bank until two years’ accounts were available
Many high street lenders simply do not have the appetite to lend to smaller businesses or provide overdrafts which would ultimately provide an essential facility that will enable that business to grow.
BFS was able to provide £100,000 using the business owner’s property as a guarantee, securing funds within two weeks.
With a plan to pay the loan back within six months once the motorbikes were sold, the loan effectively remained in place, providing a revolving credit facility which enabled the business to continue to grow, increasing sales and profitability.
The client continued to use the bridge for eight months, purchasing and re-selling stock, building his business up until he no longer needed the bridge and had a financially sound and stable infrastructure in place.
Bridging is an incredibly flexible finance product and this recent deal reflects this.
This very savvy client needed cash quickly in order to move his business forward and understood that a bridge could essentially unlock his issues and provide him with the funds needed to make the necessary changes.
We see this as a niche area for us and more business owners are recognising this gap that bridging finance can fill.
Rising Star: Becki Darlington, Bridging Finance Solutions
What does your role entail and how long have you been doing it?
I’m regional business development manager, west, at Bridging Finance Solutions (BFS). My role entails liaising with brokers and clients directly and dealing with queries regarding short-term bridging and development finance. I attend lots of local property and professionals’ events, to make contacts, as well as larger events in Birmingham and London, such as the National Association of Commercial Finance Brokers annual conference.
What attracted you to working in the mortgages and property finance sector?
I’ve always had an interest in property but never finance – I hated maths at school. My mum would put programmes such as Homes Under the Hammer, Kirsty and Phil, Grand Designs and George Clarke’s Amazing Spaces on TV all the time when I was young. You could say I was born into the interest.
What were you doing in the five years before starting here?
Before I joined BFS, I worked at another lender as a loan manager. My role included tasks such as taking an application over the phone or by email, collating the information to take forward to credit committee for a decision, creation of the offer in principle, junior underwriting and risk analysis, organising valuation and legals, completion statements, continuous contact with clients for updates throughout the loan and redemption statements including release of the DS1 form.
Prior to this I completed a two-year higher apprenticeship project management scheme at Unilever in the global home care team. I didn’t attend university and so instead I looked to gain further education through that scheme. I gained experience in creating and editing project plans, and developed my creative side in this role including some significant pieces of internal marketing that saved my team more than £40,000.
What personal talent or skill is most valuable in doing your job?
The personal talent that I find most valuable in my job is that I can remember what most people would consider as unnecessary information – things such as how many kids someone has or information about a family member that I can strike up in conversation the next time we talk. Most people are shocked that I can remember so much personal detail.
What personal talent or skill would you most like to improve on?
The aspect of my work I most want to improve is my database of contacts in the property business. As I have only been a business development manager for a short amount of time, it would be a benefit to meet as many new professionals and clients as possible.
What’s the most interesting or memorable property case you’ve been involved in?
My first case which involved Deed of Probate and my first case which went into arrears and had to go through the legal stages of repossession. These cases are less frequent than most so it was interesting to learn the different requirements for both and how the legals had to be structured differently.
Where do you see yourself in five years’ time?
I’d like to see myself in a more senior position at BFS certainly. I am really enjoying meeting new people on a weekly basis at the moment and because I’m such a sociable person, I can’t see myself changing my role any time soon. If I did fancy a change, I might dip my toe back into underwriting and the administrative or organisation side of the office, but for now I’m happy where I am.
If present-day you could go back in time and tell yourself something five years ago, what would it be?
The best thing you ever did was defer your place at Manchester Met University, keep doing what you’re doing, and it’ll work out for the best.
What’s the biggest challenge you’ve tackled so far in your career?
Unfortunately, being spoken over and ignored as a female in a male-dominated profession.
If you could have one super power, what would it be?
To find a forever home for all rescue animals. I have a rescue German Shepherd from the Royal Society for the Prevention of Cruelty to Animals. Giving him a family home at my parent’s house was the best and most rewarding feeling ever.
And finally, what’s the strangest question you’ve ever been asked?
I somehow always get asked if I’m related to someone with the same last name as myself? I’m literally from such a small family with next to no relatives in the North of England but brokers and clients always ask if I’m related to people with the same last name up and down the country.
Property price corrections may hurt those lured by city centres – BFS
High value single assets – not necessarily in London – during any property cycle typically appreciate the most quickly and are then first to come under pressure.
Whenever there is a suggestion of perceived lack of liquidity and overseas investment, values at the top end are put under pressure.
City centres attract blue chip global companies and senior employees.
They also attract foreign money as investors without the time or inclination to scour hotspots in the UK look to acquire stock in prominent areas, therefore the focus on high profile locations such as London, Manchester and Leeds continues.
A high proportion of our clients focus on areas they have a thorough knowledge of and have typically carried out extensive research around.
This inevitably leads them towards value-for-money purchases where there is good potential for increase in values post refurbishment or strong yields if they retain.
The impact for BFS therefore on price corrections is negligible, although there will undoubtedly be a weakening of appetite among buyers who realise the market is more ‘top end’ the closer you get to a city centre.
Pressure on buy-to-let
The inevitable knock-on effect of falling property values comes on the buy-to-let market where we have seen a number of lenders tighten up on loan repayment ratios and calculations.
This is making it more difficult in some circumstances where yields are being diminished by capital values.
For BFS we typically start each potential bridge at the end, so we try to create as much certainty as possible that a client can re-finance within their proposed timescales and repay us—to do otherwise would be unprofessional.
Knowledge and research essential
In summary, knowledge and thorough research are the two elements that have remained a consistent ingredient for all property investors, both new and old.
The ability to source property that is reasonably priced, in areas where there is potential for demand, yield and capital growth, is a well-trodden path.
Get this right and an investor will ride out any storm that the property market can uncover, but get it wrong and they can be backed into a corner quickly as the market hardens.
‘Generation gap’ of surveyors and property lawyers hitting specialist lending market – BFS
The lender told Specialist Lending Solutions that a “generation gap” had formed with very few people training in these areas in the eight years following the financial crash.
“In some areas you can’t get a valuer because nobody was being trained during those years,” BFS director Steve Barber said.
And he noted that the problem was particularly acute when it came to getting deals completed quickly.
“We can complete loans in four days but the biggest problem is the borrowers’ lawyers,” Barber continued.
“Sadly conveyancing in residential mortgage products has been dumbed down into a tick box exercise that if something is not a tick box it goes into the ‘too difficult to complete’ pile.
“It could be completed in 72 hours where the conveyancer has the legal expertise, but there’s a lot of residential conveyancers and not a lot of property lawyers.”
Legal executives not property lawyers
The lender, which is largely based in the northern half of England and Wales, said it is encouraging clients who want to complete quickly to use a panel lawyer as it knows these firms have the required expertise.
“There’s a ten-year generation gap,” Barber said.
“There were so few property lawyers training in 2008 to around 2015 that we got to the position where lots of legal executives were doing conveyancing but not expert property lawyers.
“It seems there are just fewer in the market and it’s something I hear a lot in the North. That will ease as more lawyers are coming out of law schools now, but it’s going to take time.”
Stamp duty pushing developers to change financing options – BFS
This is maybe a sign that additional costs such as the 3 per cent stamp duty surcharge is becoming off putting for investors.
Instead they are choosing to re-finance from a bridging loan onto a buy-to-let mortgage and take the yield and long-term capital appreciation that this typically brings.
From the Midlands upwards and across the north of England, there is a much greater potential to follow this route as acquisition costs are much lower and there is far more traditional small landlord stock such as small terraced and semi-detached houses.
Given the higher level of capital growth associated with property located in the south of England there is an increased level of buyers who want to make the purchase, improve the property and then sell on in a market that has long enjoyed higher rates of growth than other parts of the UK.
The lower yields make it more unattractive to retain in certain parts of the south also, which lends itself to sale rather than retention at the end of a bridge.
Only London nervous
In terms of Brexit and the possible impact this will have on our sector, I think central London is probably the only place that is particularly nervous on this.
Regardless of your position on Brexit, leave or remain, the facts are that large blue chip companies and merchant banks electing to relocate parts of their workforce will undoubtedly have a direct effect on high value flats and apartments in central London.
The wider picture remains very unclear, as indeed is Brexit itself.
However, property has always been relatively stable over prolonged periods which would help negate any short-term liquidity issues.
Our opinion has always been that sensible lending levels and commercially astute decisions on property advances leads to a strong book of satisfied clients.
Out-of-ground development deals growing in North – BFS
Quarter four typically sees a number of ‘urgent’ cases where completion is required before year end.
This can prove problematic when trying to arrange valuations and liaise with lawyers.
Our experience is that the more third parties introduced to a proposal, such as contractors or other lenders for example, the longer these cases can take – therefore, we rely heavily on proactive clients and their lawyers.
Deal size and property values continue to be the fundamental differentiator between northern and southern markets.
Business volume tends to be steered towards London specialists and we are happy operating in our own space which is typically covered across the Midlands, Wales and North England.
It is interesting to note that the number of ‘out of the ground’ property development deals has been markedly up in the North and this is a trend we see continuing into 2019.
We are now starting to see more enquiries for bridging and development in the Midlands and Wales.
Considerable impact of uncertainty
For 2019, I believe economic and political uncertainty will continue to have a considerable impact, particularly during the first half of next year.
The property market is sensitive to a number of factors, not just fluctuations in interest rates, so we will be aware of any early warning signs that may affect pricing and demand.
At BFS, we have always priced in line with risk and kept LTV’s at a sensible level to enable us to react quickly to any future developments.
We will continue to champion the small developer by funding more sub £1m developments which we see very much as a prime driver of the wider economy, focusing on the Northern market and using technology to enhance and strengthen our products and customer service offering.
North West’s buy-to-let boom driven by outside investors – Commercial Trust
In 2015, around 40% of investors in the North West buy-to-let market lived outside the area, while the number of investors in North West rental property who do not live in the region had reached 62% by the end of Q3 2018, according to the latest report from Commercial Trust Limited.
As an example of this growth, Merseyside-based Bridging Finance Solutions has revealed a 25% increase in turnover compared to the same period last year, a move led by a growing Northern-centric customer base.
Andrew Turner, chief executive at Commercial Trust (pictured), said the new data showed greater diversity in terms of investor location.
He said that in 2015 around 60% of all North West buy-to-let purchases came from people within the North West, 23% from people living in London and the rest from the East of England and West Midlands.
He added: “Investors living in and investing in the North West have dropped down to 38%, while London has increased to 24%. The East of England represents 11% of investors in the North West and has been joined by the South East, where 11% of these investors are located.
“In 2015, south eastern investors simply were not purchasing properties in the North West.”
Reasons for investment
The growth in investment in the North West from other areas can be partially attributed to the stamp duty changes introduced in April 2016.
Since then, the percentage of individuals, who live outside the area but invest in the North West, has significantly increased.
Turner said: “The introduction of stamp duty has affected investors more acutely in areas where property prices are higher.
“In the North West, the impact of stamp duty has been less exacerbated, due to lower house prices.”
At the same time, cities like Liverpool and Manchester have in recent years benefited from significant investment in infrastructure.
House prices in these areas started from a relatively low base compared to other parts of the country, but are starting to climb.
Despite the increase in house prices, buying a property remains more affordable in parts of the North West than elsewhere.
Vibrant small development sector is ‘unloved’ by banks – BFS
This sector remains unloved on the banking circuit and many short-term lenders look for bigger deal sizes and more developer experience.
Our view is that the success of these deals rests on the professional team and builders, rather than the individual applicant and we continue to assist clients across the UK in this area.
In addition, we have seen more retired clients wanting to downsize their home.
Often they have identified a perfect home, but have yet to place their own on the market meaning short term funds are required quickly.
Summer stands out as a challenging time of the year for the industry as a whole due to holidays.
In addition the auction houses that we work closely with have a month or two break due to lack of stock and attendees.
Property network meetings also have a summer break and the upshot of all this is that business flow is difficult to gauge.
High yield, high demand
Nationally, it’s no secret that high value single assets in and around London continue to come under huge pressure and indeed certain spots are already experiencing falls.
Our primary area of lending is in the Midlands, through the North West up to the North East, and all three of these regions continue to see robust yet steady growth combined with high yields and demand.
The North continues to steam ahead in terms of developments in the property sector and I would suggest is on a par with movement in the South, the over-riding difference being the size of the deal.
A busy market has meant changes in our team with new members of staff on board in order to meet demand.
It’s good news for the North and there is huge appetite for property, a trend which I don’t see shifting.
How brokers can help spot bridging fraud – BFS
Fraud awareness is a crucial part of our business, as fraudsters develop more sophisticated means to commit crime.
Technology is moving at a fast pace with increased online activity throughout the industry, so bridging companies must employ a more robust and savvy approach.
Use speed to pressurise
In terms of measures used to prevent fraud, we carry out rigorous underwriting and identity checks on all clients. We also use a panel of selected valuers and professionals for any specialist advice and reporting.
Undoubtedly the biggest risk is identity fraud. Proof of identity and anti-money laundering (AML) due diligence are essential pre-completion.
Speed is one of the main areas where we excel, but that is often a tactic fraudsters use to pressurise a lender to complete.
It’s vital, therefore, to meet and get to know the client to support automated AML checks. Lenders and lawyers should not shy away from asking further questions if something just does not add up.
Brokers also have their part to play in this and can help reduce their exposure with some simple steps:
- Meet the client at their home.
- Take a photo of the client holding their ID – this can be very useful if there are issues at a later date. It will also deter them if they are committing a fraud.
- A fraudulent document may be difficult to identify by most people. There are online AML providers that can verify serial numbers and in some instances carry out high level checks on the authenticity of the document.
- Has their solicitor dealt with them previously? In particular if they are trying to raise funds against an existing property.
Another high-risk area is where an applicant attempts to raise capital on an unencumbered property, not legally owned by them.
In certain scenarios additional checks are required to confirm the original property purchase.
This has been highlighted in the recent cases of P&P Property v Owen White & Catlin, and Dreamvar (UK) v Mishcon de Reya and others.
Both these related to frauds against unencumbered properties where there were discrepancies with the address of the purported owner of the property – both could have been prevented if further due diligence had been carried out.
The industry has undoubtedly taken notice of these cases and they keep us focused and vigilant.
On a broader scale, as a sector, we are increasingly working together and collectively there are a number of joint measures, including anti-fraud networks for information sharing.
We are members of a number of financial associations where lenders share knowledge and best practices, so we can continue to combat fraud.