How bridging can lend where others fear to tread


By Thomas Cantor, Head of Bridging Finance, West One Loans.

Bridging finance is synonymous with turnaround time, its whole rationale has always been delivering finance quickly, usually, but not always because something has fallen through in the process.

As such it is an extremely agile and responsive sector, where the underwriting lens has a different focus to high street lenders for example. Funding decisions are made much more on a case-by-case basis, essentially manually underwriting each deal. Almost like the banks managers of old.

It is also about having the understanding that the funding you’re providing is one of potentially a number of transactions taking place around the purchase. So taking into account the whole customer journey is key – we’re not basing decisions on what the computer says.

As we know, high street lenders are all about processing volume. But in bridging it’s much more about the individual customer, where they are going, where the loan is going to get them, and as long as the exit strategy is sound we have confidence in them.

Bridging really comes into its own when time is of the essence, whether that’s because there is a break in the chain or the original lender has pulled out for some reason, or they need to get the transaction done in time for something like the SDLT deadline.

But it’s also the flexibility of the product which is appealing to clients, especially when it’s one of several specialist finance products in play in one transaction.

In practice

We saw a text-book case of this come to fruition earlier in the year with a client which is an established property developer, with experience working for national housebuilders.

Back in April 2018, we assisted the borrower by raising money secured over the site which, at the time, comprised a vacant two-storey office block covering 9,200 sq. ft. The client purchased the site for £530k in October 2017 and subsequently obtained planning permission to build nine residential dwellings.

In September 2018, the client refinanced on to our development finance facility, which was used to repay the bridge and to provide the borrower with funds to continue with the development of the nine residential dwellings. The total gross development facility was £1.78m with £260k allocated on day one to refinance the existing bridging finance facility and £1.3m allocated to funding the build. It was modelled on the basis that LTV would never exceed 71% based on expected monthly drawdowns.

Once the development had completed in March 2020, the borrower then refinanced again onto a bridge. At the point of the refinance, the borrower had sold three of the plots, thereby reducing their exposure with development finance. The remaining six were on the market and were refinanced onto the bridge. Throughout the term of the second bridge, the borrower sold off a further three plots.

This year, in the last few months, the client refinanced the final three units onto to a buy-to-let mortgage, which allowed them to rent the remaining residential dwellings, bringing in some income but also repaying the bridging loan and reducing the borrower’s overall cost of finance.

Our team of experts were able to work together to ensure a seamless transition through the products which gave the client peace of mind whilst also avoiding delays and additional costs.

In many ways, there couldn’t be a better illustration of the role of bridging finance in enabling each stage of a development to move forward.

That is the real value of the product as it enables us to support the developer through every stage of their journey, providing exactly what was required to realise the ambition of the developer.

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