Surge of new lenders entering the short term finance market
By Bridging Loan Directory -
Brightstone Law has seen a surge of new short term lenders entering the market over the last 12 months, up by 50% on 2017. Short-term lending transactions are also up year on year, with Brightstone Law research showing that there was a 15% transactional increase in 2018.
Recent figures from the Association of Short-Term Lenders (ASTL) also show that bridging lending amongst its members rose by 15% in 2018. The value of applications have also increased, up by 13.4% to nearly £21.5bn and total loan books increased by 3.6%.
Jonathan Newman, pictured, Senior Partner at Brightstone Law commented:
“Despite Brexit and slowing house prices, the industry has remained resilient. The current economic and property market conditions do not seem to have adversely affected transactional volumes, or the appetites of lenders to fund over the market as a whole. Whilst some lenders have applied greater caution in underwriting, others have seized the opportunity to gain a foothold.
Short term commercial lending is regarded as the last area of unregulated lending, and therefore relatively quick and easy to set up to lend and open to all. With the current climate amongst institutional lenders remaining cool and processes viewed as tiresome, labour intensive and unsatisfactory, significant volumes of finance are being redirected into the short-term lending space.
We are also seeing a loosening of lending criteria and increased flexibility from new lenders entering the market. These new entrants are driven, passionate and have a willingness to adapt and innovate. They will disrupt the market, just like the first wave of challengers did 10 years ago.
However, what is deeply concerning is that some of these new lenders lack experience and so have the potential of being exposed to poorly non-performing customers, or unsuitable security. Many of these new players are unable to identify future problems and may not have the personal know-how, gained from experience, to deal with problem issues in an effective and sensible way. However, they can reduce some of those risks by tapping into the experience of professional partners for support. So selection of key professional partners is all-important to securing a successful start. Cost is a factor in that selection process, but should not be the sole one.
Hence selection of key partners is vital. Valuers with longstanding experience of market volatility, but with particular experience of the chosen asset class; intermediaries that introduce, but who are active in the wider finance market, and who understand the borrower and maintain the relationship to contribute and participate in the exit too; solicitors who have the technical competence and process to transact the property side competently and securely, but with transactional experience, knowing what can and sometimes does go wrong further down the timeline, and how to deal with that; solicitors that do not just identify issues, but are capable of offering solutions.
Brightstone Law has a well-established reputation for short term finance transactions and recovery I take great pride from the longevity of our lender client relationships. So many of our clients were once those disruptor new boys on the block and now, are established, key players, leading brands and the benchmark for new entrants. To have played a role in their growth and success is truly satisfying from our perspective.”