How to Start a Bridging Loan Company – The Experts Weigh In

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How to Start a Bridging Loan Company

The past couple of years have been lucrative for bridging firms. As banks struggled to cope with the pressure, specialist lenders surged in to fill the gap.

Now bridging companies – once such a niche corner of the market – are exploding into the mainstream.

The end of 2021 saw a rush in bridging loan applicants as property buyers raced to take last-minute advantage of the stamp duty cuts.

It’s a great time to be a bridging lender, and for new market entrants, this year could prove to be a golden opportunity.

So, how can start your own bridging loan firm? We spoke to three leading experts who’ve been there, done it and got the t-shirts.

For any ambitious new bridging lenders out, here’s a seven-point checklist to get you off on the right track.

Make sure you have enough experience

Experience of working in the sector is imperative”, highlights the CEO and Founder of the hugely successful Hope Capital, Jonathan Sealey. For Sealey, who built-up his 20+ strong bridging company from scratch, the time he spent learning the ropes was invaluable.

On average, the crème de la crème of founders are not fresh out of college (no matter what myths Silicon Valley may perpetuate).

The most up-and-coming tend to be around 45 years old when they set up their business – probably thanks to the lorry-loads of experience behind them.

Find your niche

Decide where you want to sit in the market and own it”, advises Michael Stratton, CEO and founder of MS Lending Group.  Having your unique selling point will help you differentiate from competitors and stand out from the crowd.

For bridging lenders this could mean homing in on a particular client or property group. For example, in the UK today there is a roaring gap in the market for Islamic Finance, where just a few bridging companies are thriving. Looking out for other underserved communities could prove to be beneficial for everyone.

Make a business plan

Have a plan, know your niche and stick to it”, says straight-talking Stratton. While you will inevitably need to adapt from time to time, creating a robust business model will help focus your strategy and identify any weaknesses.

In very simple terms, we make a return when we make sure that we lend money that can be paid back by the borrower”, says Sealey, explaining his bridging business model.

Some of the money we lend is from funders that we work with, but we also put our own money into every deal we do. Our aim is to keep a balance between risk and a competitive proposition to Brokers and borrowers”.

Figure out your finances

Be sure of your funding”, recommends Damien Druce, Executive Director of Black & White Bridging. Bridging firms normally secure money through lenders and investors, so it’s important to maintain strong relationships.

Before you get started, ensure that you have cash source or bullet-proof lender to back you, otherwise you could come out of it looking red-faced.

Strengthen your network

Origination of business in the early days is key”, explains Sealey. “And my contact base I had gathered from 11 years in the industry really came into fruition”. Druce agrees. One of his top three rules for starting your own bridging company is to always, “treat brokers with respect”.

Building strong relationships can really pay off! Across the COVID-19 period, 82% of bridging lenders in the UK felt supported by their funders. And a whopping 63% felt super strongly supported. The data suggests that once you’re in, you’re in. The connections hold up against pandemic-strength pressure.

Adapt to change

We’ve had to adapt to several changes over the years”, reveals Sealey. “Whether that be the need introduce new processes, or a demand in a specific area to name a few!” Being able to stay with the times and adjust when needed is an important part of growing and staying competitive.

This is especially relevant when it comes to game-changing new developments in Bridging Technology or BridgeTech.

A staggering 48% of bridging lenders admit that technology adoption is one of their most important challenges to overcome – especially when it comes to leveraging open banking.

Getting ahead of the tech game can help new entrants rocket ahead, especially as they’re not held back by legacy mainframes.

Grow sustainably

Don’t feel pressure to grow faster than you’re able to, it’s much better to be strong and steady. For Druce, this is one of the most important rules new entrants should live by. “Don’t promise what you can’t deliver”, he warns.

The company originally began as a one-man band”, remembers Sealey. “I would sit in the corner of my first office and have to wear multiple hats throughout the day, depending on what I was focusing on”.

It wasn’t until two years later that he hired his first employees. Now a decade later, Hope Capital is still marching onwards, with an impressive 23 employees and they recently added two more to their team.

To risk or not to risk?

The bridging finance industry is booming. “There is no doubt that there is a strong appetite for bridging loans in the property market at the moment”, says Sealey. “This of course means there is an opportunity for a multitude of lenders”.

But with vast rewards comes vast risks too. Underwriters know this better than anyone!

Starting a business can be incredibly stressful – even for self-employed freelance writers it can feel overwhelming sometimes! Always put your mental health first.

If you’re one of the brave souls planning to start your own bridging loan company, we’d love to hear from you. Let us know about your journey!

Interested in the bridging loan landscape for 2022? Check out Gareth Taylor’s predictions here