Experience is key to improving bridging conversions
While a few market participants have gone rather quiet over the past 12 months, the bridging finance sector remains a crowded place to operate in. So how do brokers establish who are the players to deal with and who are best avoided?
There’s a continuing disconnect between applications and completions in the bridging space and, while it’s an extremely frustrating state of affairs, the explanation does highlight the difference to me between bridging lenders in a crowded marketplace.
The latest figures from the Association of Short Term Lenders (ASTL) reveal that in the third quarter of last year, bridging applications totalled £7.9bn, while completions were just over £1.4bn, continuing the trend for low conversion rates in bridging finance. Part of the reason for this will be brokers submitting multiple applications to a number of lenders. Why do brokers do this? For a few reasons. Firstly (and going back to my school science for a second) doing things in parallel rather than in series saves time. It’s not efficient to have to wait for the answer to the first application before submitting subsequent ones.
Secondly, because not all bridging lenders have the same appetite, and if a broker doesn’t know the lender very well, having not placed many (if any) cases with it in the past, then they may just adopt a ‘suck it and see’ approach.
And, of course, there’s the chance that one lender will accept the application and offer a better rate than another lender (that doesn’t mean it will be cheaper in the long-run but that’s a whole other article…)
However, for many brokers this high drop-off rate from application to completion can be a great source of frustration, and the situation has become worse over the last year. So, what to do to improve their bridging conversions?
Experience and process are key to increased certainty in bridging finance and that means working with the right lenders. Some lenders opt to fill their business development manager (BDM) teams with inexperienced people; but I’d argue that while it’s cheaper in the short-term, it’s a false economy.
In order to secure a deal, brokers must fully engage with their BDM before submitting the application. Failing to do so could result in a frustrated client who found out the hard way that the lender would have rejected the application, had the broker done their job properly by consulting with their BDM beforehand.
Furthermore, a BDM can make a broker's job easier by liaising with the underwriting department to determine what additional information is required, thereby avoiding delays in the application process.
At London Credit, our BDMs have many years’ experience within the business, which means they are able to pre-underwrite enquiries at the outset, giving brokers greater certainty. This experience helps filter out those enquiries that won’t fit, making the whole process more efficient.
We ask the right questions from the outset, which means brokers don’t have to jump through hoops to get a decision. At the same time, our robust funding model means that funding does not dictate our lending decisions – providing brokers with more certainty and a greater chance of improving their bridging conversions.
Moving on to the application process. The primary goal is to obtain a positive decision on the bridging loan application as quickly as possible. This can only be achieved by providing accurate and complete information about the case from the outset. Lenders require as much information as possible to enable their underwriters to evaluate the loan and determine whether they can assist. That means talking to the BDM about what is required (and then providing it).
I urge all brokers to avoid the temptation of oversimplifying the case by withholding information, as this will only lead to delays and negative outcomes. Specialist lending inherently involves complexity, but at London Credit we have the expertise in handling such situations and resolving issues. Therefore, it's crucial to be transparent and upfront in any conversations with BDMs from the beginning, providing as much detail as possible.
Many things in life can be fast tracked but experience isn’t one of them. BDMs with many years under their belt, who of course are supported by experienced underwriters, are worth their weight in gold, as they provide an invaluable source of knowledge about a lender’s underwriting, appetite and likelihood of agreeing to a case. They are a key differentiator between lenders in a market who, on the face of it, seem to be offering the same thing.
Marios Theophanous is Credit Manager at London Credit