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BRIDGING Champion of the Bridging Professional


 ASTL  Bridging In-depth  Industry Comment

July 2021


CrowdProperty’s Mike Bristow talks about disrupting the market and supporting the under-served

Property People

Property finance by property people As property finance by property people, CrowdProperty understands how market demand is changing and the funding products needed. The speed, ease, transparency and certainty of funding we offer enables the property developers we work with to secure better deals and grow their property businesses quicker, which is why we give quick decisions on funding. We are bringing back customer focus and changing the game of property project finance. We offer the full suite of short-term finance across any type of project:



Growing pains Publishing Director Robyn Hall Publishing Editor Ryan Fowler Editor Jessica Bird Deputy News Editor Jake Carter Editorial Director Nia Williams Commercial Director Matt Bond Advertising Sales Executive Tolu Akinnugba Advertising Sales Executive Jordan Ashford Production Editor Felix Blakeston Head of Marketing Robyn Ashman


ne of the conversations I’ve had with a number of people this month has been centred around increased competition in the bridging market, and whether this is to be welcomed or feared. The pandemic has pushed short-term and specialist lending into the mainstream – and the spotlight – continuing a trajectory that started when it first emerged in the ‘60s, and which was kicked into gear first by the Credit Crunch. This has, in turn, led to more lenders entering – or increase their presence – in the space, where they might not have been key players previously. Increased competition, and added options for the growing number of borrowers turning to this space, is surely a good thing. However, there are many concerns around sustainability, whether new entrants might not understand the complexities of the market, and how an eventual consolidation and paring back might affect the borrower. In addition, those lenders which have weathered the storm of not just the pandemic, but in many instances past crises too, are understandably concerned about the length of people’s memories. Having worked hard to support brokers and their clients through the difficult early months of COVID-19, are loyalty and goodwill now going to be trumped by a flashy new proposition and attractive headline rates? On the positive side, however, this makes for a healthy, innovative market. Established lenders cannot rest on their laurels, and must consider how their proposition stands out in an increasingly broad and competitive space. Let’s just hope that bridging can continue to strike the right balance between striding into the future and remembering the lessons of the past. B I


Contents 5 Jonathan Newman Busting myths about title insurance 7 Donna Wells The rise and rise of property auctions 9 Jason Berry The good, the bad, and the ugly 11 Brian Rubins Separating the men from the boys 12 Feature: The changing face of bridging Jake Carter looks at how the bridging market has evolved over the years 22 Lessons for the future Bridging Introducer’s round-table considers pain points in the market and how these might affect its future 28 Cover: Property people Jessica Bird talks to Mike Bristow about how CrowdProperty is disrupting the market 34 Vic Jannels Working together to raise standards

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Busting myths about title insurance Jonathan Newman senior partner, Brightstone Law


s someone who works very closely with lenders every day, I’ve seen first-hand the benefits they receive from taking appropriate title insurance. But there remain a lot of myths about what this is and how it can benefit lenders – and brokers for that matter. So, this month I wanted to do something a little different and give my friend Chris Taylor, corporate development director at Westcor International, an opportunity to bust some of the title insurance myths that he finds most annoying. MYTH: TITLE INSURANCE IS SUDDENLY POPULAR IN BRIDGING

CT: Experienced lenders have been using title insurance for years on any form of secured lending. The concept originates from the US, but policies there offer much less protection. It’s also not growing because of COVID-19, which is something I’ve read. Our clients are far more worried about the post-COVID world and the end of state support, with the potential to cause widespread defaults. Title insurance is not credit insurance, but nine times out of 10 the possession process will flush out a title issue. Title insurance repays losses under the mortgage and any legal expenses incurred investigating the issues, whether proven or not – and whether a claim is paid or not. It also protects against the resource requirements within the lending business. Ultimately, this means they can control their overall cost of lending, and therefore be more competitive.

Title insurance can also give lenders a competitive edge as it can help them get loans on their books more quickly, so they can offer a better service. Generally, a policy costs less than the legals – in most cases, less than the search pack. Fundamentally, title insurance a growing sector because it works for lenders. All of these lender benefits, of course, also benefit brokers. MYTH: TITLE INSURANCE ONLY PROTECTS SEARCHES

CT: A proper title policy goes well beyond searches, including local, drainage and waters, mining and mineral extraction, chancel, village green, etcetera. These searches may be expensive and slow to obtain, but in our experience they don’t reveal much risk to a lender that needs to be managed. It also protects against known defects – anything that would be found during a UK Finance prescribed title investigation, such as restrictive covenants, defective leases, or tenancy agreements, to name just a few. It protects against unknown defects, such as fraud and forgery on behalf of both the borrower and the solicitor, negligence on behalf of the solicitor or search agents, false assertions, undue influence and mental incapacity. Most claims come from fraud, forgery, or solicitor mistakes. Mental capacity and undue influence are growing issues. These are challenges lenders are facing in the real world, and comprehensive title insurance can offer protection against them. MYTH: IT’S JUST A FORM OF INDEMNITY USED TO SPEED UP SIMPLE CASES

CT: First, it’s important to note that a true title policy isn’t an indemnity, it is an unequivocal guarantee that a secured loan is valid, enforceable, in the correct priority and secured

against a good and marketable title. An indemnity insurer will pay out when the loss is crystalised, whereas title insurance like our Perfect Title policy will respond before a loss is crystalised, because it is not loss-based. We have clients using Perfect Title routinely for residential, commercial and development transactions. These could be single assets running to tens of millions, or portfolios running to hundreds of millions. If used properly, a lender shouldn’t face protracted lending issues. If a lender is using the right product, they will end up with a loan that is underpinned by greater security than any Certificate of Title. MYTH: SOLICITORS PREFER NOT TO USE TITLE INSURANCE

CT: I’ve never met a solicitor who won’t use title insurance. Lenders will make decisions based on their appetite for perceived risk. This might be driven by funding lines or other capital requirements, but it’s never just a case of insisting on full searches. As I mentioned earlier, omitting searches actually poses little by way of risk. Where people may encounter an issue is where title insurance is sought, alongside a full title diligence. It’s important to remember that you can’t insure cases where problems have already been identified or there is contention between the parties. Insurers don’t like adverse selection. However, if title insurance is taken at the outset, a solicitor shouldn’t encounter these issues. MYTH: TITLE INSURANCE IS INFLEXIBLE

CT: Title insurance is often viewed as an off-the-shelf product that indemnifies searches, but the way title insurers work is that most things are insurable. Policies like Perfect Title have evolved and can accommodate a hybrid title investigation process, where certain checks and balances can be made, whilst relying on the policy for other aspects of risk. It’s no longer a one-size-fits-all approach. Ultimately, this provides lenders with a comfort blanket that enables them to lend more efficiently and more confidently, and this benefits everyone in the process. B I JULY 2021



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The rise and rise of property auctions Donna Wells director, First 4 Bridging


ll businesses, especially those which are predominantly consumer facing, have faced their fair share of challenges during the pandemic. Technology has enabled various sectors to evolve over this period, and firms have had to be more innovative than ever when engaging with their customer base through a range of mediums. This is also evident across the property market. We have seen record levels of purchase activity even through some lingering restrictions and lockdowns, which in itself is quite remarkable. Online viewings have played a major role in overcoming some of these physical barriers, and this interactive experience may well continue to be an attractive option for a growing number of buyers. Property auctions have also had to adapt over the past 12 to 18 months. In times gone by, I imagine some property auctions taking place in dark, smoke-filled rooms with clandestine bidding wars, funded by questionable means. Then again, I may just have an overactive imagination. Thankfully, we are now operating within a far more professional, robust and responsible time when it comes to the financing of such acquisitions.

the speed, transparency, and security of a traditional auction, but with an extended completion timeline of within 56 days. Upon the acceptance of an offer, or at the close of the auction, the successful buyer must place a nonrefundable reservation fee with the agents to reserve the property. Following acceptance of the offer and payment of the reservation fee, the buyer is given 28 days to exchange and then a further 28 to complete. It is a process which does allow the buyer additional time to arrange finance to complete the exchange and completion, but a fixed timeline still remains, which can often cause issues when arranging any funding and from a legal perspective.

The upward shift in competitive bidding is also driving up sale prices, with more than 48% of properties selling above their reserve price in May. Mirroring the rise in buyer interest, online auction sales are also on the up, with 2,159 properties already sold so far this year, raising £345m in capital value for sellers. In addition, Auction House announced its highest ever monthly sales total, with 397 properties selling during May, achieving a success rate of 85.2% and raising £70,309,251. According to the group, lots sold so far this year are 1,395, from the 1,709 offered, at a success rate of 81.6%, raising a total of £221,674,003.


Auctions can be a great place for homeowners and investors to snap up a bargain. However, whether it’s through a traditional or modern process, it’s vital for buyers to undertake due diligence on the property they are looking to purchase, and how they are planning to fund it. With many mainstream lenders unable – or unwilling – to accommodate such tight timelines, bridging finance has often proved to be the perfect solution for borrowers who have gone down the auction route in the past. Even though timelines are being extended through modern auction methods, additional market complexity and lending restrictions mean that 56 days can still prove to be an extremely short timeframe. Short-term finance is certainly not the ideal route for all property purchases; however, this type of finance can often prove to be a valuable option to stop purchasers from losing the property or deposit. A good packager with strong specialist expertise in this sector can play a hugely important role in sourcing the right funding terms from the right lender when speed really is of the essence. B I

There is reported to have been an exponential rise in demand for property auctions, driven by increasing consumer confidence and the desire for alternative buying solutions that deliver speed, security, and results. To help illustrate this, auctioneer iamsold recently reported a recordbreaking number of bids so far this year, indicating a growing appetite for auction properties among buyers. According to the firm, more than 22,000 bids were placed between January and the end of May, which is up by 205% on the same period last year and a 146% rise compared to the same period in 2019.


Staying with the purchase and funding element of a traditional auction, an exchange of contracts takes place as soon as the auction ends. The buyer is required to pay a 10% deposit at the point of exchange and must complete within 14 to 28 days. This is not the only form of auction process. The modern method of has been adopted by auction houses and estate agents across the UK. This offers

Bridging: A potential solution for auction buyers




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The good, the bad, and the ugly Jason Berry group sales and marketing director, Crystal Specialist Finance


hen you have to shoot, shoot. Don’t talk.” So says Tuco the Ugly in one of the greatest western films of all time, and while his predicament may have been physical, the message in a wider context is to get it right and act quickly before it all goes wrong. I started with this analogy not only to get your attention, but because the bridging sector has recently begun to show some parallels. There are undoubtedly lenders which are consistently competitive, and crucially, provide certainty of decision and clarity of their terms upfront. However, having this week rescued a broker from a deal where a 2% arrangement fee, 2% exit fee and a monthly rate of 1.5% were expected from the borrower, it is evident that brokers need to choose their bridging partners wisely to avoid the baddies. THE START

In January 2021, Bridging Trends reported a 38% reduction in short-term transactions in 2020 compared with 2019. The same report highlighted that as borrower circumstances continue to evolve, regulated applications (48%) have been reaching parity with nonregulated (52%). But of course, the start of this year has seen levels of bridging business like no other. Assisted by the initial Stamp Duty Land Tax (SDLT) deadline in March and its subsequent rollover until June, plus a huge rise in capital raising and homeowner light development applications, we should see unprecedented levels of lending in

the first half of the year. Everything is looking rosy for our main protagonist, the intermediary. THE MIDDLE

Given the healthy picture, opportunities have certainly been spotted in the bridging space by investors. Many have pumped money into existing businesses – both in terms of extra capital for established bridging lenders and also to start new companies – while others have introduced bridging into their more established product ranges. It’s easy to see why. Attracted by interest rate margins, low loan-to-values (LTVs), minimised risk and high default fees when things don’t go to plan for the borrower, it seems that the lender is in a real position of power. It is becoming a cluttered area of the specialist market, and this should lead to excellent levels of competition, which benefits customer outcomes on literally every level. Pricing currently starts from 0.4% monthly, but then ranges hugely and can go anywhere north of 2% monthly, and LTVs now go up to 85% – figures correct as of 1 July 2021. THE TWIST

This is where the double bluff comes front and centre, and it is one am unwitting intermediary potentially does not see coming. Opportunistic bridging lenders continue to pitch their market-leading advertised rates, only to increase them through the processing, citing client profile, security or valuation, or sometimes all three, as their reasoning. Upfront and exit fees also vary greatly, and again it is not uncommon to see opportunistic funders change their fees during processing – citing the same reasons. Promised timescales are also a point of fancy for some – ‘guaranteed in seven days or less’ is not an uncommon claim.

Bridging: Get it right and act quickly

In many circumstances all three advertised claims – low rates, fees and timescales – are used simply to drag in applications, only for the applicants to then be confronted with barriers to entry that can be nigh-on impossible to meet. Most are familiar with the term ‘cherry picking’. All of this can create huge damage to the sector’s reputation, and among it all, the intermediary suddenly finds that what was a simple application is turning into the stuff of nightmares. THE END

The fact is that not all hope is lost. Specialist distributors are now becoming the go-to hero of choice for intermediaries, as they understand the story with all its highs and lows, pitfalls and perils, and they are able to navigate the bridging market to ensure the best possible chance of a happy ending for the customer. Yes, we must all acknowledge that nothing is straightforward in the specialist sector, as applications are as a general rule more unique and complicated, but there is a way to maximise the probability of that a case will complete. Finally, back to the sometimes wise words of Tuco the Ugly: “If you work for a living, why do you kill yourself working?” Let us do the work and take away the drama, giving you more time to live life to its fullest. B I JULY 2021



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Separating the men from the boys Brian Rubins executive chairman, Alternative Bridging Corporation Limited


lease ignore the sexist heading, because our industry includes some very talented women, and month by month their numbers are growing. Boys, girls, men or women, there are great opportunities in the short-term lending industry for us all. To maximise them, the broker community – an amazing group that feeds deals into the system – will fare better by working more closely with lenders, and vice versa. With few exceptions, there is a need to work closely, to understand each other better, and it is this that ‘separates the men from the boys’. Those lenders that believe they do not need a close relationship with their introducers should shut up shop now! Lenders need brokers just as much as brokers need lending sources – and this is true for firms large or small, handling the occasional enquiry or totally focused on the short-term market. Together we are stronger. But what does working closely together mean? The best meetings are held at round tables, so that all parties sit side by side with no ‘them and us’. For lenders and introducers, it should be no different. Let us analyse what each needs of the other. Brokers’ requirements start with respect from lenders and recognition that they identify the opportunities which fuel our industry. This includes providing a prompt service – that is a given – but that alone is not enough. COMPLEX CASES

Processing loans which tick all the boxes is simple, but working together comes into play when a proposal does

not quite meet the lender’s criteria. For example, perhaps a down valuation occurs because the borrower’s enthusiasm is greater than the valuer’s. Generally, cutting back the loan leads to the opportunity being wasted. But can the loan-to-value (LTV) be extended a little? Is there income which can be proven so that all or part of the interest retention can be waived? Perhaps there is another asset where a second charge can be taken? None of this will be discovered without lender and broker working together. Another instance is term loans if the ability to service the debt cannot be adequately proven at the outset. It may be a small hotel, a B&B or student accommodation where the income needs to be established. In this situation, a listening lender – if it believes the income will be proven during the first year or so – could build in an interest deposit account to supplement cashflow until the property is self-supporting. It is very common for brokers to request an existing valuation to be accepted where the valuer is not on the lender’s panel. Instead of rejecting the request, a lender could consider if it is possible to add the valuer to its panel. Of course there may be circumstances where this is not possible, but overall there will be many occasions where unnecessary duplication of expense and delay can be avoided. TWO-WAY STREET

Working together is not just one-way – introducers need to step up as well. If brokers act as a postbox passing on unqualified enquiries, they can’t be disappointed when lenders show little enthusiasm. Those brokers who review a proposal, gather together all the information and supporting documents and present the opportunity in a coherent, well-argued way will attract lenders’ support, now and in the future.

By all means, if necessary, talk through the generality of the enquiry with the lender before committing time to a detailed application, but then give it your best shot. A short precis supported by basic documents or links to online information will speed up the process and avoid delay while questions are asked. Brokers look for heads of terms to be issued as soon as possible, and this is the way to achieve it. Many bridging brokers now include development finance in their armoury, and here lenders will particularly appreciate a well-researched enquiry. Provide them with the appraisal and cashflow forecast, a copy of the planning permission or a link to the portal, explain how construction will be procured and make clear what experience the promoter has as a developer by providing details of other recent projects. Not all introducers will have detailed knowledge of all classes of loans, and this is particularly true regarding development finance. Do not be embarrassed, be prepared to ask your lenders for help – listen and learn. Alternative Bridging Corporation has recognised the need for further education, and we have established the Alternative Academy to assist our staff extend their knowledge. To help introducers to work more effectively with us, we will invite the broker community to participate with them in short but focused Zoom meetings on issues we identify as needing explanation. These tutorials will include explanatory papers which will be hosted on our web site. One of the most important factors in working together is communication. Whereas email is a great way to move information and documents, I truly hate it when it is used for questions and answers, as it does not provide for meaningful discussion. Far better, use the telephone, or best of all if it is impractical to meet, use Zoom or Teams for face-to-face discussion. It saves time and avoids misunderstandings. So, going forward, co-operation and communication is the answer – it separates the men from the boys. B I JUNE 2021





THE CHANGI FACE OF Jake Carter asks industry experts how the bridging market has shifted over the years, as well as looking at how its trajectory might continue


ridging first appeared as a standalone sector in the 1960s. The market gradually rose in prominence over the decades, and the onset of the Credit Crunch in 2007-8 brought an opportunity for this and other specialist fields to come to the fore as mainstream banks faced increasing constraints. During the COVID-19 pandemic, the market gained yet more chances for progression and evolution, as bridging lenders stepped in to mend chain breaks, fill funding gaps, keep development projects moving, and provide finance for many of those unexpectedly shut out by the high street banks. Over the years, bridging’s reputation has shifted away from that of opportunistic ‘cowboy’ price gouging, and towards something much more respectable – a valuable tool, rather than a last resort. There are both positive and negative ramifications to the changes that have taken place since this market’s emergence, and ones that will continue to shape this market well into the future. RACE TO THE BOTTOM One result of bridging’s move from niche last resort towards a more mainstream, competitive and widely used product, is a drop in rates. This is a benefit to consumers, and in turn feeds into the popularity of the product and the strength of this market. →









MARKET XXXXXXXXX Miranda Khadr, founder of Pitch 4 Finance, says: “There are some great rates coming out in the market at present. A few lenders are providing bridging finance at as low as 0.43%, and there is definitely strong competition between some of the major players in the bridging market at present.” She adds: “This can only be a good thing for the customers, as long as service levels do not dwindle.” Vic Jannels, chief executive of The Association of Short Term Lenders (ASTL), says: “For the consumer, low rates are a good thing, particularly given the adverse commentary about high rates in this sector some years back.” However, as with anything, there is a balance to be struck here. Healthy competition and attractive rates might be the sign of a market in full strength, but a ‘race to the bottom’, in which lenders feel compelled to strip out value to justify low rates simply for their surface appeal, and to push more products to recoup the same return, could cause serious issues for this market’s recently established positive image. The average consumer is likely drawn towards a lower rate, and may not understand the value they could be losing in the process. Barney Illes, lending manager at Blend Network, explains: “In the bridging market, like in any other market, you get what you pay for.” He believes that the issue is that there are a lot of small, unregulated lenders which are happy to pick up one-off business by showing competitive headline rates. However, these lenders then “charge the unsuspecting borrower exorbitant penalty rates if for any reason the borrower gets delayed.” He adds: “Sadly, that is the business model for many of the small unregulated bridgers in the market.” Chris Oatway, director of LDNfinance, agrees: “There is so much liquidity in the market and loads of lenders are competing for similar deals. Rates have come down – which is, overall, a good thing for the

consumer – however, we need to make sure that clients understand the lender’s terms in full.” Oatway believes that there needs to be full transparency early on in the process – with no costs or fees included that are hidden in the initial presentation of indicative terms. Far from being bleak in his outlook, Illes does believe there will be a consolidation whereby regulated lenders which boast transparency and professionalism will reconfirm their position in the market. He continues: “Of course, borrowers are interested in building long-term relationships with decent lenders who can support them in their development journey, not necessarily just the cheapest one.” Jannels says that, while it is natural for lenders to compete on rates, they also need to ensure that they are achieving sufficient margins to make lending sustainable in both the medium and long-term. However, Jason Berry, group sales and marketing director at Crystal Specialist Finance, does not believe the market is in danger of seeing a race to the bottom, and that lenders will instead maintain moderate rates. “Increased competition is certainly helping deliver the most competitive pricing we have ever seen in the bridging sector,” he says. “However, when it comes to selecting the best lender for client circumstance, although pricing is an important factor, there are many other considerations to take into account. “These include the certainty of decision, loan-tovalue [LTV] availability, the days it will take to complete, and minimum and maximum loan amounts.” Alan Cleary, group managing director of Precise Mortgages, believes that brokers would in fact like to rates come down further. He says: “There is nothing wrong with a bit of healthy competition, as it generally means a good outcome for consumers, and as long as they are being treated fairly and the lender can make money whilst making sensible lending decisions, I do not have any issues with a bit of rate competition.” →


Aspen legal partner saves clients £32,000 deposit


hile bridging completion times are on the rise, an Aspen Bridging integrated legal partner, Ola Leslie Solicitors, has stepped in to ensure a client completed in 10 days to save their £32,000 deposit. The developer, having secured a threebedroom terraced house in South East London for full refurbishment, chose to use their own legal representation. However, as time ran out they contacted Aspen, which recommended Ayesha Yunus at Ola Leslie Solicitors.



JULY 2021

Yunus completed all legal requirements immediately in conjunction with Aspen’s representative, Leigh Haigh at FieldFisher. At the outset of the application, Saif Khalique, senior underwriter at Aspen, utilised the business’ Rapid Desktop Valuation bridge product, given the immediate requirement to realise funds. The £232,700, 73% loan-to-value (LTV) facility was completed on a 10-month term on a stepped rate, starting at 0.54% per month.

Commenting on the case, Khalique said: “When speed is of the essence it is essential for a client to have legal representation that understands bridging finance, otherwise in nine cases out of 10 there will be unnecessary delays. “With our new Rapid Desktop Valuation product we include integrated legal contact and fees, a specialist borrower solicitor service integrated with our own legal firm to maximise speed whilst offering independent advice.”




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Speedy lending to secure a home Harry Landy managing director, Enterprise Finance


ne of the areas of the bridging market that has seen a rise in demand is regulated bridging loans, where the borrower buys a home to live in before selling an existing property. There is evidence to suggest that the pandemic has had some influence on this, with an increase in people wanting to move outside of major cities. In addition, the stamp duty holiday has put even greater pressure on completing purchases. In the current climate, the most sought-after properties in the most desirable areas are being snapped up soon after they appear on the market. Some people are unable to wait for their current home to sell before completing their new purchase, as they do not want to risk losing the property. We have a great example of a bridging loan that allowed a couple to buy their dream home in a highly desirable area, where property hardly ever changed hands. The need for speed to secure the house was immense, and the only way they could do this was by using a bridging loan. One of the main advantages of a bridging loan is that it can be issued fast, typically in just a couple of weeks. But when the situation is urgent, it is necessary to pull out all the stops, and we did just that completing this particular loan in only five hours. The couple had a buy-to-let (BTL) property they wanted to sell and use the funds from that to buy a home to live in. Taking out a bridging loan gave them more breathing space and the security they could buy the home they wanted. Their new home cost £275,000 and they wanted to borrow £145,000,



JULY 2021

giving the deal a loan-to-value (LTV) of 40%. We were able to secure a 12-month unregulated bridging loan at 0.75% from specialist lender Together. The transaction was not treated as regulated by the lender, because the loan was secured against an investment property rather than a residential home. Together was able to use a desktop valuation and its own in-house solicitors, Priority Law, to take care of the conveyancing, both of which contributed to the fast turnaround.

“The transaction was not treated as regulated by the lender, because the loan was secured against an investment property” Marylen Edwards, regional account manager at Together, complimented Enterprise on the speed with which we provided all the necessary documentation. Together is a lender that we know is able to work quickly, and the fact we have a close working relationship meant we were able to reach the best outcome for our client. Enterprise has been around for 20 years as a specialist distributor, and being able to help clients with crucial financial requirements is what we relish. It gives us great satisfaction when a touch-and-go case like this comes though successfully, and the clients were over the moon. They really thought they had lost the chance of buying the home they had set their hearts on. They now have a year to sell their BTL property without rushing. But in today’s market it is likely to be sold sooner rather than later, and they can pay back the bridging loan whenever the sale goes through, without penalty.

Damien Druce, commercial director of Black & White Bridging, says that while a rate reduction is always good news for the borrower, it is less so for the financial institutions that provide the capital to lenders with the capability of structuring and executing deals. He explains: “History tells us that when the rate race can go no further, then once criteria starts to be eased as well, the slippery slope is not far away. Thankfully, we have not reached that point and today’s funders will not let it get out of hand. “For me, brokers and borrowers will continue to chase price and ultimately shadows, but lenders will seek out quality and maintain a tight hold on their risk appetite.” TURNAROUND TIMES MT Finance’s Bridging Trends data for Q1 2021 found that completion times had risen to 53 days, up from 50 in the previous quarter alone. Meanwhile, the ASTL has reported that on average it takes more than £7 of applications to complete £1 of bridging. These figures are likely due to increased workloads and over-stretched processes, as well – Jannels points out – as the practice of brokers placing multiple applications and thereby creating additional nonprofitable administration. While this perhaps means that bridging is no longer the fast solution it once was seen to be, Jannels says that the ethos of bridging goes further than this, and is more about securing a result which is appropriate for both borrower and lender. He adds: “It is a lender’s responsibility is to ensure that a clear path to exit exists, so it may be this that is a cause of delays rather than the gaining of an offer itself.” Khadr adds that often the issue is out of a lender’s control: “In a challenging market it seems to be harder to instruct valuers and receive their reports in a timely fashion. Sometimes, where lenders have restricted their sourcing of valuers via panels, we have seen up to six-week delays.” While market players need to work towards clearing roadblocks, part of the solution is simply to manage clients’ expectations around delays, and educate them on starting the process as early as possible. This is also where the balance between cost and service can come into play, as some of those lenders that are able to commit to faster timeframes may not offer the cheapest rates. BRIDGING EVOLUTION One factor behind the increase in turnaround times, says Illes, is that bridging finance is no longer a simple product for a certain set of circumstances. Even the type of property being dealt with has expanded and become more complex. He says: “For example, we see a lot of bridging being used for the purchase of the more unusual →

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MARKET XXXXXXXXX types of buildings, such as old chapels or churches, lighthouses or windmills. The turnaround time of these types of bridging loans will be longer due to the more in-depth due diligence required in these types of buildings.” Oatway agrees, adding that increased lender flexibility and willingness to take on trickier cases naturally means things take longer. Berry also notes the other side of this coin, namely that bridging is also moving further into the mainstream through its regular use to stop residential chain breaks. So, the industry covers a wide range of purposes, including residential and refurbishment loans, auction purchases, buy-to-let opportunities, land with planning, commercial, semi-commercial, and second charges, to name a few. “This is where the industry has moved forward exponentially,” says Oatway. “Bridging finance lenders have had a massive impact on the property industry and have increased the new of opportunities on projects beyond anything we could have imagined 10 years ago.” Illes notes that the development and bridging finance sectors have also changed to serve a more diverse, informed, connected and demanding range of customers than ever before. Khadr agrees: “We are seeing bridging used as a short-term strategy until a business can show significant growth post-COVID in order to term out commercial or hospitality properties. “Where planning is expected, clients are using bridging finance until the development finance can be procured on the back of a positive planning approval.” The broadening remit and increased flexibility of bridging has indeed come into play in order to ease the strains caused by the pandemic. In addition, the market is well placed to keep up with cultural shifts, such as increased working from home, or the trend of commercial to residential conversions under new permitted development (PD) rules. Cleary adds: “The beauty of bridging is how flexible it is and how many different purposes it can be used for. However, it is sometimes the simplest things it is used for that are the most popular. Take downsizing, for example. Giving people the ability to take control, move fast and step outside of a chain is very empowering at a time when they may be feeling a bit helpless.” GROWING COMPETITION With the evolution and expansion of the market has naturally come an influx of new entrants and increased competition, which Cleary describes as “absolutely a good thing,” albeit with some caveats. He says: “It raises everyone’s game as the more competition and product choice there is, the better it is for customers. However, whilst more competition also encourages innovation, we could see some lenders →



JULY 2021

The impact of the pandemic Mike Bristow CEO and co-founder, CrowdProperty


here is no doubt that the pandemic has had a major impact on the specialist finance market. Most funders were exposed, with single sources of capital, and they were the first to shut up shop as COVID-19 set in. Even those with multiple sources faced exactly the same underpinning exposures to equity market volatility and lending attitudes. CrowdProperty’s uniquely diverse sources of capital – from retail, high net worth, ultra-high net worth, private fund and institutional sources – have enabled us to be open for business throughout these tougher times. We have worked closely with current borrowers, and others stuck on expensive late interest rates, assessing each on a case-by-case basis with an expert eye, and working through the best solution for all concerned. We’ve made greater use of multiple bridges to cost-effectively lend across the project cycle; for example, projects in Preston, Telford and Lambeth have all made use of a bridging loan to secure the deal whilst precommencement conditions were being sorted. In development finance, we have had a development exit product for years to allow for final touches and sales timelines, which has understandably become a popular helping hand in the current market, releasing the commitments of an expiring development finance loan and providing breathing space to achieve the most successful exit for the project. We have used development exits to manage difficulties in the term lending market in obtaining refinancing or sales. A recent project in Warwick was a development loan that moved to an exit bridge to account for the slow

refinance market, whilst in Tenterden we made use of a development exit to enable the borrower to move off expensive development finance. This customer-focused approach is much more cost-effective for the borrower and enables us to support small to medium (SME) developers throughout their projects. Speed, ease and certainty of finance are key to developers spending less time sourcing funding and more time completing their projects to grow their businesses quicker and more profitably. At CrowdProperty, we leverage our proprietary technology for efficiency and deep property expertise for effectiveness of lending – this is even more important in the complex world of property development.

“We have had a development exit product for years to allow for final touches and sales timelines, which has become a popular helping hand, releasing the commitments of an expiring loan and providing breathing space” Our proposition is underpinned by technology-enabled systems, processes and algorithms, as well as using machine learning and big data analysis to process loan applications. The reliability of lending and knowledgeable support we have been able to offer SME property developers throughout the past 12 months is attracting more and more developers, and abundant capital from major global institutions and private investors – solidifying our reputation as the best specialist property development lender in the market.

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MARKET XXXXXXXXX taking too many risks with pricing and criteria. It can be very hard to be a newcomer in such a competitive space – you need to be able to offer a first-class service, something that some lenders cannot do straight off the bat.” Khadr says lenders must avoid letting increased competition cause an undue focus on price, where innovation should instead focus on imrpoving due diligence processes and product features. She explains: “Whilst competition is a good thing from a price perspective, there are key differentials for lenders that should be worked on. Product differentiation is key so that every lender is not just chasing the same business.” This increased competition, while often leading to better pricing and more flexible solutions, may simply not be sustainable long-term. Illes says: “We will see a consolidation in this market where borrowers are turning towards the more techpowered, innovative and regulated lenders which can provide transparency and professionalism.” Oatway agrees that market growth cannot continue at its current rate: “We are already noticing that some lenders which have an excellent product range are finding it hard to get their money out the door, and this is a sign that there is a certain level of saturation already present within the market. “For a lender to stand out and be preferred over another, then it is generally expected that it will have the most advanced technology or streamlined underwriting process and the ability to move fast. “Although, there are some lenders which are very streamlined already, which are able to move quickly on a deal without having to rely heavily on technology.”

“Individual lenders are beginning to invest in the tools to make their processes more efficient and easier to access, but there is still lots to be done in this area”

DIGITAL TRANSFORMATION For many market players, the past year has seen high speed advances in technology throughout the bridging process. For example, Oatway points out that automatic valuation models (AVMs) have helped speed up the processing of applications, while apps and platforms have eased the onboarding process for clients. He adds: “Clients are able to provide proof of ID and address through a new site from the comfort of their own home, which speeds everything up. These are good examples of where [technology] has really made a difference.” However, Druce says: “We have hardly reached the point where the sector can claim to have digitally transformed itself. “Individual lenders are beginning to invest in the tools to make their processes more efficient and easier to access, but there is still lots to be done in this area.” Cleary points out that not everyone wants to operate digitally, saying instead that it is about choice: “We offer our brokers a range of ways they can communicate with us.

OLD AND NEW Ultimately, whether remaining nimble in the face of rapid change and advancements over the past year or so, or steadily undergoing the long process of changing its reputation and broadening its use over the decades since its inception, this is an industry that is defined by its ability to evolve. For Illes, this does not mean forgetting the past, but instead, “blending the best of the old and the best of the new.” He adds: “Digging a little into history, we find that bridging finance has its roots in the 1960s when it was offered mainly by the high street banks and almost exclusively for house purchases only. “The ‘bridge’ between a house purchase and a delayed house sale was seen as something of a last resort.” Illes concludes: “With greater choice, lower prices and technology bandwidth making the process faster, easier and much more efficient, these are exciting times for everyone involved in this vibrant and fastmoving industry – property developers, property investors, lenders and brokers alike.” B I



JULY 2021

“Whether it is face-to-face or online, we have adopted a multi-faceted approach which lets brokers communicate with us in the way they feel most comfortable with.” Berry agrees that technology should only hold a partial position in the future of the market. He says: “I expect this to only be an enabler so information can be gathered intelligently and quickly. We are a long way from technology delivering an end-to-end process panacea for bridging.” Berry believes that making good lending decisions requires human interpretation so that elements such as customer profile, security quality and the actual project plans themselves can be fully understood. Nevertheless, businesses like Pitch 4 Finance – which uses technology to match brokers and borrowers with a range of lenders – showcase the way that digitalisation can be used positively to help navigate an increasingly complex, competitive market. Khadr says: “The provision of client solutions has to stretch beyond the lenders we are already aware of, and we have to use technology that helps the whole industry find the best client solutions. “This goes beyond just price, and the more we can use technology the more we can evidence research that we have provided the best client outcome.”


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05/07/2021 11:46



LESSONS FOR THE FUTURE Jessica Bird outlines the key talking points from Bridging Introducer’s recent round-table, which considered pain points in the bridging and development markets, and how these fields might work to improve as time goes on


ver the course of the past year and half, with increasing numbers of borrowers facing exclusion from the mainstream market as well as chain breaks and other unforeseen circumstances, specialist lenders have stepped in to fill the gap more than ever. In turn, shifting demand as we rethink the way we work and live means that the future looks bright for bridging and development. However, with new business volumes rising and cases staying just as complex as ever, pain points and pitfalls have been made more acute as specialist markets have come further into the mainstream consciousness. At Bridging Introducer’s recent round-table, panelists from CrowdProperty, HR Wilson Associates, Spring Mount Finance, Precise, MT Finance, Shawbrook Bank, LendInvest and Roma Finance took a look at how to address these in order to sustain positive growth. LESSONS FROM THE PANDEMIC Any market might be forgiven for being shaken at its foundations by the events of the COVID-19 pandemic. However, this does not mean that the issues raised during this period can simply be forgotten as part and parcel of a difficult time. Instead, says Mike Bristow, CEO and co-founder of CrowdProperty, these should be taken as lessons for the future. For CrowdProperty, the instability faced by the market, particularly in the early days of lockdown, showed the flaws in focusing on a single funding line. He explains: “What was highlighted last year was for us the power of diverse sources of capital, and sometimes the constraints and risks associated with



single sources of capital in terms of reliability through economic uncertainty. “From a developer’s point of view, it’s important to understand sources of capital, and whether that can be reliable through any market. We saw examples of offers being reneged upon and drawdowns being turned down, which is destructive to any project.” Bristow adds that there is a sense of failure during the pandemic around providing reliable finance, particularly to the small to medium (SME) developer sector. Not all of the issues that were highlighted by the COVID-19 crisis were to do with failings from lenders’ perspectives, however. There have also been market forces at play that could not be helped, and issues faced by other players that have fed into some of the inefficiencies being seen. Scott Marshall, managing director of Roma Finance, says: “I think we’ve all seen a real glut of trying to get deals completed over the past couple of months, particularly because of the issues around stamp duty. “In particular, borrowers’ lawyers have been absolutely choked trying to do their best during a really challenging period where there’s been furlough and all sorts of other issues. “We’ve also seen a property market that has come back with a vengeance very quickly and caught everybody, particularly on the legal side, by surprise. What that’s led to is bottlenecks.” He marks some of this as being due to the difficulties of home working. While the move remote was undertaken with impressive efficiency, and tools such as Zoom and Teams certainly helped facilitate some of the conversations and working practices that would


BRIDGING AND DEVELOPMENT otherwise have been impossible, the fact remains – according to Marshall – that collaboration has become more difficult. While there are widespread reports of businesses choosing to remain remote or move to a hybrid model, Marshall suggests that to tackle increased workloads and snarled processes, in-person conversations are a must. “Hopefully those issues – now that the cliff-edge event has ended and people are coming back to offices more and can collaborate more and get deals done quickly – will start to evaporate and the market will go back to some sort of normality,” he continues. Adrian Moloney, group sales director at Precise Mortgages, agrees that issues around valuations and conveyancing showed weak points and bottlenecks in the market, particularly in the lead up to the stamp duty holiday starting to taper off. “As a market, everyone did pretty well at getting things over the line at the end of june,” he says. “Those of us who have been around for previous stamp duty changes will know we may now go into a slight lull. “One of the bits that needs to move forward in this market is bringing conveyancing into the 21st Century, because that seems to have been where the real challenges have been. “I think you’ve got a lot of liquid lenders, lenders with access to capital and who want to lend, so I don’t think that’s a challenge, but how do we improve the elements of the house buying or house building process that cause us the most challenges? There’s certainly a few lessons as an industry we can learn as the current stamp duty ends.” WORKING TOGETHER Looking further into the development side, Bristow points out that CrowdProperty was founded by professionals in this space who had noticed and wanted to resolve certain frustrations in terms of speed, access to decision-makers, certainty and responsiveness in this market. He says: “It’s no secret that whereas SME developers used to deliver 30%-plus of house building in the UK, post-financial crisis that dropped to circa 10%. That’s because there have been significant barriers and frustrations in that market around funding.

“What was highlighted last year was the power of diverse sources of capital, and sometimes the constraints and risks associated with single sources of capital” MIKE BRISTOW

“If you’re dealing with professionals, there’s less need for regulation. The main issue is collaboration and communication” STEWART HORSBURGH

“A lot of the market stepped away from the SME developer, which is vital to UK housebuilding.” Indeed, he adds that while the issues faced during the pandemic might be only temporary, there are more fundamental issues that should not be overlooked. “If you ask the developers, structurally they are not served well by the lending market, and that has resulted in significant drop off of house building from that segment, it’s the major driver,” he explains. “By far the biggest way of unlocking SME house building is with a more customer-centric approach.” Marshall adds that the issue of single source funding, highlighted by the pandemic, is one that needs a longterm resolution, even if the pandemic were to no longer have an impact. He says: “It’s amazing how many lenders are actually really brokers – not lending off their own balance sheets, they don’t have multiple sources of capital or liquid sources, and therefore frequently let customers down at the eleventh hour, because they haven’t got the funding where it’s needed.” One long-term problem Marshall highlights is that, while customers and brokers became aware of these issues due to the pandemic and were perhaps turned off those lenders, the market is already seeing the focus return to questions of rate rather than reputation. “A broker has a responsibility to their customer to understand the lenders they’re dealing with, how they’re funded, how the lenders deal with nuclear events and support the broker and customer,” he explains. “Brokers getting under the skin of the lenders is as important as it is for the lenders to do due diligence on the customers.” Stewart Horsburgh, business development manager at HR Wilson Associates, agrees: “There’s a lot we can do as brokers and developers to get our house in order when we present to funders. I think a lot of the choking or timescale it takes to get through the system to complete is obviously due to the funder requiring things, but if it takes the broker and developer too much time, it’s very easy to blame the funder, valuer, and solicitor, because we’ve compressed their ability to do their job.” Horsburgh adds that the liquidity and funding issues mentioned by other delegates have not arisen in his own experience over the past 18 months, and that instead the pandemic has thrown into sharp → JULY 2021   BRIDGING INTRODUCER




“Fundamentally, the right alternative finance players are building high quality customer-centric lenders” MIKE BRISTOW

relief the importance of effective packaging. Marshall suggests that this importance also means that there is a responsibility placed on the lender itself, in terms of educating intermediaries around what is needed and when. The important thing, Horsburgh answers, is clarity and consistency on the expectations from the start. Leanne Smith, sales director at LendInvest, adds that this communication goes both ways: “A lender should be there to support in the good times, as well as when the times are not so good. It’s about being transparent and working with the broker, that’s key here. “If the developer is open with their current progress and any delays, we will work with them, go on a site visit, speak to surveyors and the broker, and that helps with the best results all round. “Some lenders potentially overdo it with the extension fees – we’re in a period of time where we have to work with developers to ensure that we get the best results.” Lee Albino, regional development manager at Shawbrook Bank, says: “As a lender we have a dedicated team to support in helping to complete their projects.” Moloney adds: “The important part from a broker’s point of view, because of course they’re acting for a builder or individual client, is to keep engaged with us during the process. “As responsible lenders who want to provide a good outcome, we’ll work with the client through that process. It is a collaboration to make sure you get the most positive outcome.” VICTIMS OF SUCCESS One of the key issues under discussion in the bridging market at the moment is the increase in turnaround and completion times. According to Bridging Trends, completion times are up to an average of 53 days, while the



JULY 2021

Association of Short Term Lenders (ASTL) says it takes £7 of applications for every £1 of completions. This might be put down to snarled processes as a result of the pandemic, but the fact remains that bridging is perhaps no longer deserving of its reputation as fast finance. However, balanced against increasingly competitive rates and useful products, this is perhaps not entirely a bad thing. Marshall says: “Going back, bridging was always a dirty word – if people needed this money, they were going to have to pay for it. With the exit of mainstream banks from the specialist lending market, bridging has taken a much more central place that isn’t just about speed. “The bits that are important around speed is actually the speed with which decisions can be made, because often the speed with which a transaction can complete is outside of the control of the lender. “But actually, bridging has become about more than just speed – it has become about flexibility, transparency, reliability. It’s much broader.” Moloney also maintains that increased completion times have not in fact taken away from the value of bridging during the pandemic, such as its use to stop chain breaks, and to help those borrowers looking to complete in time to save on stamp duty. Smith agrees, adding that many of the issues have been outside of lenders’ hands, but that businesses have done well to innovate and accept new methods of working. Moving forward, she adds that it is not about blindly pushing for lower completion times: “The relationship is key, speaking to that decision-maker and understanding what’s required. “And also embedding technology – having as much of the process automated as possible but still having

“As responsible lenders who want to provide a good outcome, we’ll work with the client through that process. It is a collaboration” ADRIAN MOLONEY


BRIDGING AND DEVELOPMENT that hands-on approach where the underwriter is making a decision and you’re not speaking to a robot.” “The imperative is delivering the customer outcome – which is getting the transaction completed,” says Bristow. “What are the internal controllable things and what are the external controllable things? “We can work in close partnership with all stakeholders to deliver a better customer outcome. I think historically that perspective on the customer and what they ultimately want has been missing.” Marshall agrees that what sets specialist lending apart is the intelligent human touch, but Albino says technology will play a significant role in pushing completion times back down, although he adds that it is also simply the case that some cases in this market are incredibly complex. “I don’t think it’s necessarily a funder’s issue with process and operations,” he explains. “Some deals are just quite technical and require that time for all parties to get involved and for relationships to come together and sort it out.” Richard Sherman, business development manager (BDM) for the South West and South Wales at MT Finance, says lenders must manage expectations. “It’s about being clear and transparent from the start,” he explains. “If a broker is coming to you with a client who needs a bridge in 10 days, it’s up to the lender to not over-promise, if that’s not achievable.” Sherman adds: “I think most brokers would choose actually getting the deal across the line over getting a better rate. The problem is you can’t always promise a certain service without knowing the actual deal first, when you start that conversation it’s before you know the actual ins and outs. “It’s hard as lenders to understand from day one how we’re going to achieve what the client wants, but it’s about working with the brokers, educating them on us as a lender, what our service is like, where our money comes from, and more than just the deal.” CHANGING PRIORITIES While a move away from the image of ‘fast finance’ might be a concern, it is also arguably part and parcel of the market shifting towards new priorities. This can also be seen in the general drop in rates as the market becomes more competitive. Moloney says that we may need to be wary of this direction of travel, though: “A lot of lenders have got money to lend, and they tend to drive down prices or

“It’s hard as lenders to understand from day one how we’re going to achieve what the client wants, but it’s about working with the brokers” RICHARD SHERMAN go up the risk curve. What we certainly don’t want is to see rates that look like long-term lending, because that doesn’t go with the risk that’s there. “From our point of view, we kind of ignore what other lenders do and plough our own furrow. What you’ve got here is quite a crowded market these days, lenders dipping in and out, at points driving down prices or going up the risk curve, but the point is it’s about reliability of the decision as part of the deal.” Smith also voices concern about a potential ‘race to the bottom’ on rates, but notes that this has started to stabilise, adding: “Short-term lending is meant to be a bit more expensive, because you are pricing according to risk – or speed. Nine times out of 10 bridging cases are urgent – the broker wants the best rates but the key thing is deliverability and relationships.” “If rates keep going lower then you’ve got to look at sustainability, and managing that risk curve as well,” agrees Albino. Charles Mackintosh, director of Spring Mount Finance, adds: “From a broker’s perspective, we’ve heard the word ‘deliverability’ today, and that is the critical word, that’s what we require. “In terms of my reputation, that’s predicated on what the funders can deliver. I need to work with funders who do what they say they’re going to do. “In terms of rates, as long as you can present to the client that what they’re getting is a market rate, it doesn’t have to be the best rate – as long as you’re confident they’re getting value for money then you can stand behind that.” PRACTICAL CHALLENGES In addition to the backlogs and issues potentially being faced when forming a deal, there are numerous issues that can arise over the lifetime of a project itself. →

JULY 2021





“Some deals are just quite technical and require that time for all parties to get involved, and for relationships to come together and sort it out” LEE ALBINO “

For example, developers are currently facing rising raw materials costs, as well as social distancing and potential worker shortages, as the UK continues to navigate through the pandemic. “I think raw materials pricing will stabilise – in a pandemic and recession there are winners and losers, but the sharp operators actually take the opportunity to review their business practices,” says Mackintosh. “If that’s an opportunity to bump prices up, some will do that. There have been some really horrific price increases, but I think it will stabilise.” At the moment, the fact remains that this is being folded into the deals being made across the development market, making terms increasingly strict. Mackintosh says: “What it does lead you back to is, does the developer have an adequate contingency in their appraisal? Those who had a 3% contingency a year ago will be scratching their heads at the moment.” He points to one lender whose institutional funder decided that it would not engage in development deals without a 15% contingency. Marshall adds that if raw materials and specialist labour are becoming more expensive, and availability becoming scarcer, elongating the timescales for projects, whether temporary or not, this could lead to major contractors having to fund developments at a loss and potentially going bust. “That does lenders and brokers no favours whatsoever,” he continues. “That’s the real risk that we’re facing if lenders are not flexible around helping their customers through something that’s clearly no fault of their own. An unfinished property is worth significantly less than if the lenders extend their facilities to get the project finished.” Bristow agrees, adding that this is where that culture of communication and transparency really comes into the fore.



JULY 2021

“Another key thing is dealing with experienced developers,” Smith adds. “Those who can build in levels of contingency. “With regards to materials costs, these are hurdles and these experienced lenders and developers should be overcome them. There is still a housing shortage at the end of the day.” Marshall notes that the flexibility to ensure these projects get over the line has been relatively easy for lenders to provide recently, considering the rising value of residential housing stock. However, he says: “The challenge, and what will sort the good lenders from the bad, is if the property market stabilises or starts to come off a bit. That’s where you’ll see good lenders being able to support their customers through a more challenging property market. “Look at what happened 15 months ago, and the number of lenders that weren’t supporting their customers through a challenging time – if the lender hasn’t supported their customer through a nuclear event, if there’s another one, how certain can the broker be that they will be supported in a more challenging property market? “Understanding how a lender behaves when the environment is more challenging should help a broker determine whether to recommend it to their customer.” Bristow also warns brokers to keep an eye out for those lenders who, in difficult times, assert heavy duty hidden fees in order to make the headline rate seem more attractive. FUTURE TRENDS One of the questions that has arisen recently is that of increased regulation. Some have suggested that whole of market regulation would be ideal for bridging, while others have drawn attention to developments around fee disclosures, suggesting

“If the developer is open with their current progress, we will work with them, go on a site visit, speak to surveyors and the broker, and that helps with the best results all round” LEANNE SMITH


BRIDGING AND DEVELOPMENT that lenders may have to plan for a more heavily regulated future. “Regulated or unregulated, if you’re dealing with professionals there’s less need for regulation,” says Horsburgh. “To the point about hidden charges or surprises from an unsupportive lender, that’s remembered in the future. The main issue as we’ve all touched on is collaboration and communication through the whole process to get the end result.” Sherman points out that MT Finance has recently launched a regulated product, adding: “I don’t believe anything’s changed within our actual team. Yes, we have a regulated and unregulated team now, but in terms of our documents, they’re all clear and transparent. The only difference is the broker on the regulated side has to do a lot more regarding the application.” As a bank, Shawbrook is entirely regulated. Albino says this fits with its culture of transparency around fees, which he says is simply “the right thing to do.” Smith is supportive of a more regulated market when it comes to ensuring transparency. “However, I’m always mindful, when we say ‘widespread regulation’, that it’s used in the right way, and is not simply adding administrative burden and slowing down the deal process,” she adds. Another trend that looks set to continue is the rise in innovative forms of lending, such as technology-driven platforms and peer-to-peer structures. For some, this is a brave new world, whereas others voice concerns about a move away from traditional structures. Nevertheless, Marshall points out that peer-to-peer lending is not so different from the original building society structure, and that the form lending takes is ultimately less important than being able to provide support to borrowers. “Lenders need to be more open about the ways in which they are funded,” he says. “It’s absolutely critical to giving a broker and customer certainty about the ability to deliver. “Peer-to-peer lenders have had bad press, but they have actually been a force for good following the global financial crisis, when mainstream lenders disappeared.” “From a broker, developer, borrower point of view, a lot of the historical concerns have been diminished,” says Horsburgh. “Again, the point is surety of decisions and getting the deal done.” Bristow says: “Fundamentally, the right alternative finance players are building high quality customercentric lenders, but there are players that don’t get

that point, and that’s where the market perception is being ruptured. “But fundamentally, there are fintech and proptech innovators that will bring better customer outcomes.” In terms of positive trends looking into the future, Horsburgh notes: “There’s a lot of money out there, and a lot of people willing to do business, which I see as very positive now and going forward.”

“Bridging has become about more than just speed – it has become about flexibility, transparency, reliability. It’s much broader” SCOTT MARSHALL

The panel also agrees that the future looks set to involve an increased focus on SME developers, as well as a push for more houses to be built, and a positive message around environmental and social change. Sherman adds that the events of the pandemic have thrown a positive light on the sector, saying: “At the end of the day, we’ve all been working closely with funders and brokers, and got through the last 15 months, including a very busy June. “We’ve all adapted pretty well to a tough time. Now it’s about carrying on, moving forward, adjusting appropriately to support clients.” Albino adds: “Bridging is a smart solution, investors know how to use it, it’s cheap money and they can use quickly to maximise an asset’s potential.” “Lockdown has spurred on technology with lenders,” says Smith. “That’s a great move and for the years to come technology is going to be pushing through more and more.” Finally, Mackintosh concludes: “We’re in interesting times and it will be interesting to see what happens when government support measures come to an end, what impact that will have on the economy and property values as well. “The encouraging thing is that clients are all very committed to projects and building pipelines of projects. As long as we’ve got that positive sentiment in the market, we should all continue to make a living.” B I

JULY 2021





Property people Jessica Bird talks to Mike Bristow, CEO and co-founder of CrowdProperty, about disrupting the market and the importance of finance delivered by the right people Can you give us some background about CrowdProperty and its approach to lending?

CrowdProperty was set up in 2013 because the founders personally felt the pain of raising finance for our property projects through decades of investing in – and developing – property ourselves. With over 100 years’ experience of property investing and developing between us, we have exceptional hands-on expertise in exactly the asset class we’re lending against. So, we set ourselves the challenge of building the best small to medium (SME) property development lender in the market, the customer-centric lender that we would have wanted when we were undertaking property projects ourselves – property finance by property people. We look at each and every project in great detail, with expert eyes and mountains of data – we’ve seen a total of £6bn of property development finance applications, enabling us to implement machine learning algorithms to efficiently and effectively process loan applications, complementing our expert scrutiny and value-add. Having spoken to one of our decision-makers, the project will rapidly progress through an efficient 57step underwriting due diligence process that has been built utilising our team’s decades of experience and the knowledge acquired in the seven-plus years of operating CrowdProperty, leveraging technology for efficiency and expertise for effectiveness. A case manager is assigned to each project endto-end, to ensure support through from investment committee approval to completion and on-site progress, to help make the project a success. We always wanted an expert lender sounding board for our projects when we were developing, and that’s exactly what CrowdProperty offers – we’ve built the technology, data analytics and expertise to do that extremely efficiently. We understand the need for speed, ease, certainty, transparency and expertise, which is why we give quick decisions on funding and can complete swiftly.



We’ll give a view on every application and help property professionals pick the most fruitful projects. This is critically important – projects take significant time to deliver, and our commitment is to help ensure that projects are undertaken that will provide a return on that time and effort. If it’s a ‘no’, we’ll provide helpful feedback, and help the developer to find a project that will get the returns they deserve. Why is this approach important in the current market? Traditional sources of finance walked away from SME property developers after the global financial crisis. Following this, very little investment in people, expertise and technology ensued, causing housing output from the SME housebuilding sector to fall from one-third of UK residential construction in 2008 to just 10% by 2017, with access to finance being the biggest barrier to the SME segment building more homes. Very few players in the market had a customercentric proposition and acted like a partner to property developers. That is what CrowdProperty was built to be – a value-adding partner for life. Fast forward to 2020, and many traditional lenders with single – or even a few – wholesale sources of capital failed housebuilders. Their sources of capital paused as they faced equity volatility in other parts of their books, even when construction could continue, reneging on offers and even project drawdowns. Our strategy of having diverse sources of capital across major institutions, funds, family offices, high net worth individuals (HNWs) and private investors was proven, providing perfect reliability of funding, and thereby saving good projects that had been adversely affected by this constraint of traditional sources of finance. With major institutional backing – including a recently closed £300m funding line – the proof of over £300m-worth of projects funded, and our market leadership position and reliability through COVID-19, CrowdProperty has shown that there are no pitfalls in



Mike Bristow our model, which shouldn’t be confused with some of the risks of the many small platforms in this space. In the short-term market, our Bridging Finance and Auction Finance products guarantee delivery of the finance needed to help developers secure a property purchase within tight timescales. We’ve also made greater use of multiple bridges to cost effectively lend throughout the project cycle, gain advantage in a competitive market and secure deals, or cope with problems in the term market. This customer-focused, property expert approach is much more cost-effective for the borrower and enables us to support the SME developers we work with throughout their projects. Leveraging proprietary technology for efficiency and deep property expertise for effectiveness, we’ve built the best property project lender in the market with the developer at its heart. As property people, we know that vendors value speed and certainty – we’ve seen tens of thousands of pounds being saved against the highest bid, due to our customers putting forward a more progressed and proceedable offer package. A quick decision on funding removes dead time waiting for confirmation and strengthens the developer’s negotiation hand – applying early in the process means we can deliver a competitive advantage to maximise profit. We also offer more than just funding. Our team is made up of property professionals, with backgrounds in surveying, planning, agency and managing their own property development projects. This means that

we speak the client’s language and are often seen as part of their consultancy team – they share problems with us and we help to develop solutions, acting like a true partner. This ‘property finance by property people’ partnership approach means that we can use our expertise to add value throughout the project to ensure success. Throughout the pandemic we’ve been a trusted partner to our developers to advise on reviewing supply chains, identifying areas of potential impact, implementing new working practices and procedures and working closer than ever with them in many practical and knowledgeable ways to mitigate the risks to progressing their sites. We’ve supported many intermediaries whose clients faced delays and expensive late interest rates and fees with other funders, assessing each case with an expert eye and working through the best solution for all concerned. Whilst expertise is core to our partnership approach, technology then brings competitive advantage to our customers through the speed of finance provision, throughout the project lifecycle. Our proprietary market-leading technology platform for efficiency and deep expertise for effectiveness means we have built the best lender in the market for SME developers. How has the business grown and changed since its launch? It’s amazing to think that in less than a decade we’ve built the UK’s leading specialist property project lending platform – a profitable fintech and proptech online lending innovator changing the game of property project finance. We’ve funded around £300m of property, agreed approximately £200m of facilities and funded about 1,500 homes. We’ve been recognised by Deloitte as the 41st fastest growing tech business in the UK in its Fast50 2020 report, and by the Financial Times as the 132nd fastest growing business in Europe in its FT1000 2021 report. We’re on a trajectory to continue growing as rapidly as we have done with a clear strategy to be lending £400m-plus per annum by 2024. That knowledge and expertise, coupled with our highly scalable technology, means we can also go global. In May 2021 we launched in Australia to offer a non-bank lending alternative to the SME property development market there, which faces similar pains to the UK. How do you vet those registering as lenders and borrowers, and balance the need for speed with strict due diligence? We’re a Financial Conduct Authority (FCA) regulated business, so we perform anti-money laundering → JULY 2021    BRIDGING INTRODUCER



INTERVIEW (AML) and know your customer (KYC) checks in order to verify lender identities and prevent money laundering. Our high-quality origination and trusted brand are naturally attracting more and more institutional sources of capital looking to work with the most proven, highest quality players with the deepest asset class expertise and market-leading track records. Our team, processes, systems, controls and governance have met the highest possible institutional standards. Our loan due diligence process and commitment to quality underwriting are key to our business – we never compromise and understandably tightened criteria through 2020. When assessing applications, we look at both the project and the borrower – we are property experts who work to understand each and every deal we are approached with. We want to understand both the skillset of our borrowers and their motivation – will they dig deep when the challenges come? If we like the project but aren’t quite convinced the team has all the skills necessary to see it through optimally, we’ll say what we think is missing, so they have the chance to fill those gaps. Those pulling together a strong power team and bringing together the recognised skillsets have not only a stronger story, but a stronger likelihood of success. That helps the project, helps the securing of finance and increases the successful completion of that project – which is what we all want. Our proposition is underpinned by a proprietary technology platform for efficiencies of underwriting, data analytics, workflows, payments, funding, monitoring and reporting, coupled with decades of SME property development expertise for effectiveness of lending. We have leading third-party data, raw data feeds and internal analytics benefiting from £6bn of applications, including complex machine learning models that can only be trained with such an extensive data set. Property director Andrew Hall has over 35 years’ experience as a qualified Royal Institution of Chartered Surveyors (RICS) surveyor, through multiple cycles, and is the leading expert in a team of 15 that validates deals that go to the investment committee. We have developed a rigorous due diligence process through decades of hands-on expertise in exactly the asset class being lent against, always built around the customer’s need for speed, ease and certainty of finance. What are some key market trends you expect to see over the coming year? Over the past 12 months we have seen many applications from property professionals who have



been faced with penalty fees and rates, where lockdown has caused delays on site or in exiting through sale or refinance. Proactive brokers and developers have approached CrowdProperty for our Development Exit Finance and Development Finish and Exit Finance products, in order to provide more time for projects to reach an exit, without the excessive penalty fees and rates that currently plague the development finance and bridging sectors. These products are designed to help developers to bridge the period between finishing – or almost finishing – a development project, releasing the commitments of an expiring development finance loan and providing breathing space to achieve the most successful exit for the project. As restrictions continue to ease, we envisage that the government initiatives around planning and permitted development rights that were introduced will encourage developers to undertake innovative projects. When the new permitted development rights came into force in August last year, we saw rising interest in our Airspace Development Finance product, which enables SME developers to pursue ambitious and creative opportunities by unlocking the potential development space above existing buildings in desirable locations. Related to this, we expect our dedicated Modern Methods of Construction (MMC) Finance product – which was the first dedicated MMC finance product to be brought to market – will also become more popular, not least because MMC pairs very well with airspace development projects. Amongst other things, this product addresses the unique cashflow challenges of MMC approaches. Joint venture finance is also likely to become more popular, catering for situations where the developer and an asset owner work together – often where initial price expectations between parties are misaligned but there is alignment to progress the project. This eases cashflow demands, pools both hard asset and knowledge resources and ultimately unlocks more development opportunities. The introduction of new permitted development rights (Class MA) for premises falling within Use Class E will undoubtedly cause a rise in the demand for our Commercial to Residential Finance product. This could lead to developers purchasing portfolios of houses in multiple occupation (HMOs), utilising our HMO and Co-Living Finance product, and we expect this market to continue to grow in order to deliver much-needed housing supply. Recognising that not all projects can be pigeonholed, our Special Situations Finance product has the flexibility for bespoke lending structures put together by our team of property experts – but that’s not at ‘bespoke’ prices.


INTERVIEW What is the role of businesses like yours in meeting issues around housing supply?

Do you foresee peer-to-peer alternative lending becoming more common in the future?

It is no secret that the UK is suffering from a chronic shortage of housing supply. According to Parliament, the number of new homes needed in England alone is as many as 340,000 each year, with the total housing stock in 2017-18 increasing by around 222,000 homes. As reinforced by Secretary of State for Housing Robert Jenrick, the finite number of larger sites are getting built out, and therefore SME developers unlocking the near infinite smaller parcels of land, infill sites and conversion opportunities, is key to filling the shortfall. Our research shows that better sources of funding is the single most important factor in getting smaller developers building more, which is exactly what CrowdProperty offers. The failings of traditional sources of finance for this segment have not only restricted the number of homes that are built, but also spend in the UK economy on labour, materials and services – each home built contributing about £100,000 of spend – which is now even more critical as we rebuild the economy.

We’ve been talking about technology-enabled alternative finance for years – the UK leads the world in this area, which is not so ‘alternative’ anymore. Fintech is making financial services far more efficient and rewarding for customers – in CrowdProperty’s case, for SME residential property developers and everyday investors – and has very much come to the fore with the recent Kalifa Review, in which Ron Kalifa said: “FinTech is the future of financial services… it’s permanent and changing the shape of finance.” The sector has gone from filling a gap that traditional lenders were unable to service, to leading the way in driving economic growth and recovery. But the fundamental point – and one which many miss – is that CrowdProperty is about delivering developer customer outcomes best, underpinned by technology for efficiency and expertise for effectiveness of lending as enablers of that.

What is your approach to environmental concerns and green projects? Is this something the market needs to be focusing on in general in the near future?

2021 has been an exciting year for us so far, with the launch in Australia and securing a £300m funding line with a new major investment manager. We’re on a trajectory to continue growing as rapidly as we have done, underpinned by a very scalable, in-house built, proprietary technology platform and scalable capital sources, that will see the business unlock the potential for many more SME property developers in building more homes and spending more in the UK economy. We have a clear strategy that can take us to £400m lending per annum in the UK by 2024. We’re working very hard behind the scenes on several exciting projects to deepen our competitive advantage and bring a progressively more valuable proposition to both sides of the marketplace, but can’t disclose details as they are commercially and competitively sensitive – do watch this space.

We’re right at the cutting edge of innovation in the residential development sector, including environmental concerns. MMC has the potential to drive down the environmental impact of housebuilding, although the biggest impact is usually in the lifetime operating environmental impact of housing. We scrutinise developer end product specifications to ensure that they are investing in this area – not just because of the macro environmental context, but also because buyers are expecting it, so it’s important to the exit of the development project. What is the role of associations such as the 36H Group in improving or developing the industry? The 36H Group, of which we are a founding member, is a collection of the market leaders in the platform lending industry. Collectively, we play a key role in thought leadership, best practice and regulatory consultation of the platform lending industry. The sector is recognised by policymakers and regulators alike as extremely important, having built a highly effective distribution and underwriting or credit management infrastructure to lend to consumers and small businesses, including the residential housebuilding industry.

What developments or changes might we expect to see in the near future for CrowdProperty?

What message would you like to get across about the benefits of working with CrowdProperty? We’re bringing back customer focus, changing the game of property project finance and very much here to help – on whatever type of project the developer is undertaking. Our ‘property finance by property people’ positioning is unique and proving to be hugely valued by developers, with 35% of our lending being repeat business, despite high growth of new customers. Let us help you build your business quicker and more profitably. Together we build. B I JULY 2021   BRIDGING INTRODUCER




The imperative of choosing t Mike Bristow, CEO and co-founder of CrowdProperty, considers the most important factors when selecting a lender, and why working in partnership is key


he property development and investment experience at the heart of CrowdProperty means we concentrate on understanding and focusing on the needs of small to medium enterprise (SME) property professionals. Insights from our latest survey – the largest ever conducted amongst SME residential property developers – revealed more about their experiences and future plans, which enables us to better serve the market. A strategy employed by one of our founders when they started out in property around 20 years ago was ‘buy house, let it out, refinance, repeat’, but this doesn’t stack up anymore. Extraordinary profit attracts greater competition – and often taxation – and that requires participants to compete harder, to shift business models and generally work harder for profit. The strategy most preferred by respondents to our survey – with 62% overall stating they will be doing it more (35%) or much more (27%) – is to build or refurbish to keep. We see this as a structural change amongst property investors in the absence of strong capital growth projections – ‘buy, add value, refinance, repeat’ – with the value-add piece enabling recycling of capital being the change, and the consistent piece being the desire to build a long-term portfolio, despite taxation changes for landlords. The respondents dug into the crux of the biggest housing output barrier, responding to the question: what’s most important when seeking finance for your property projects? The top responses, and therefore the most important factors amongst the entire set of respondents, were: 1. Reliability of finance 2. Transparency 3. Speed of finance 4. Loan amount or maximum loan-to-value (LTV) 5. Quick and easy drawdowns Before digging into each of these in more detail, it’s powerful to understand differences between



experience segments. Relative to the overall set, less experienced SME developers place greater importance on LTVs, interest rates, fees and the timing of fees. This is rational – they are building cost models and working to optimise those to ensure that the development stacks up and can potentially raise equity investment to complement the debt capital. The telling factors are those which are rated as relatively important by more experienced developers: reliability of finance, transparency, speed of finance, quick and easy drawdowns, access to decision-makers and the knowledge or expertise of the lender. These individuals have felt the pain of traditional sources of finance. A very tangible example of this is in the speed of drawdowns – sitting on IMS reports can have severe knock-on effects to contractor morale, and potentially project progress. These developers crave a better, more holistic, expertise-based and trusted partnership with their lender. Experienced developers also know that reducing the time spent on funding – which for an SME developer is approximately one-third of their time – means that more can be spent on finding and progressing sites, growing their property business quicker. RELIABLE FINANCE Let’s take a look at the factors that were collectively rated highest in more detail. First and foremost, it’s fascinating that in a preCOVID world – the survey took place in Q4 2019 – reliability of finance came out top. The reality is that this has never been more stresstested than through the pandemic. We collectively know a lot more about how reliable lenders are when the going gets uncertain, and whose sources of funding are actually reliable. Understanding the sources of your lender’s capital is critically important. We’ve seen offers being reneged upon – not just tightened on LTV or loan-to-gross-development-value (LTGDV) – and even drawdowns to cover completed activity on site being refused, through no fault of the project itself.



g the right funding partner We have refinanced both situations over the last 12 months, which is destructive to the project. This is driven by the fact that many lenders have single sources of wholesale capital, the broader exposure of which is often linked to equity markets. They will press pause when markets get volatile, which ultimately impacts the developer most of all. As it happens – and this couldn’t be more important right now – CrowdProperty has uniquely diverse sources of capital from major institutions, including a new £300m funding line, funds, family offices, high net worth individuals (HNWs) and private investors. Diverse types of capital, with many sources within each type, with different needs, preferences and attitudes – which can only be built up from sevenplus years of lending with a perfect track record – give far greater reliability of funding through any stage of market cycles. BACKING NEGOTIATIONS Next, let’s consider how borrowers go about obtaining loans for their projects. Around half of respondents said they apply for finance once an offer has been made on a site or property. Only 17% apply for finance when they’ve found the site and have run preliminary numbers, before they’ve started to negotiate. We believe that many are missing a trick here. We provide speed, ease and certainty of funding to match vendor needs. Amongst the many ways of supporting developers to close the best deal possible, we’ve provided proof of backing to take into the negotiation, with spectacular results. We’ve had our customers save tens of thousands of pounds by putting forward a more progressed and proceedable offer package to the vendor, including certainty of finance, versus the highest bid for the sites in question. Developers which engage early and differentiate their offer from others have a competitive advantage, and we’ll give them the best possible advantage versus working with traditional sources of finance. WORKING IN PARTNERSHIP Our partnership approach has been brought into focus during the recent pandemic, as we have worked closely with existing borrowers to advise on reviewing supply chains, identifying areas of potential impact, implementing new working practices or procedures, and working closer than ever with them in many practical and knowledgeable ways to mitigate the risks to progressing their sites.

It has never been more important – and indeed advantageous – to work with a lender which understands the developer’s vision and needs. At CrowdProperty we recognise that working together always produces the best outcome for a project, sharing a common goal, namely to finish and exit the project successfully. Our nimble, rapid and value-adding approach means developers have a higher chance of success in their project and can grow their property businesses quicker and more profitably. These insights, coupled with so many more from our research, as well as crucially our experiences as SME developers ourselves, have enabled us to build the best SME property project lender in the market. That’s why we’ve funded over £300m of property, agreed £200m of facilities and funded more than 1,500 homes, unlocking upwards of £120m of spend by SME developers on labour, material and services in the UK economy. As a provider of property finance by property people, we’re bringing back the customer focus, changing the game of property project finance, and very much here to help. Together we build a better future. B I

Building on experience: CrowdProperty has funded more than 1,500 homes





Working together to raise standards Vic Jannels CEO, ASTL


he ASTL regularly holds joint events with our colleagues from the Financial Intermediary and Broker Association (FIBA) for a selected group of invitees from around the industry. This provides an excellent opportunity to discuss current industry issues and best practice in a confidential environment. Whilst the individual comments remain in-house, I think it’s worth reviewing the topics discussed at our latest event. DISCLOSURE AND EDUCATION

The first topic is one that has been a consistent theme of ours in recent weeks: undisclosed commissions. While lenders operating in the nonregulated market are not required by regulation to disclose any commission that is paid to a broker, recent cases indicate that this is likely to become a legal requirement. Any lender that fails to fully disclose commissions paid to a broker leaves itself open to potential customer redress. It has been suggested that borrowers can potentially bring claims, including redeemed loans, and that there is no limitation on how long files should be kept, with the burden of proof being on the lender and the broker. The main takeaway from this session was that lenders should take the opportunity to speak with their brokers to identify whether all commissions have been disclosed and whether there is evidence to support this. This is certainly a course of action I would recommend to all lenders. The second topic, and one that I would like to explore a bit further



within this article, was centered on education. The forum gave us a chance to open a discussion around potential options to help improve standards and consistency, and to grow customer confidence in commercial lending. One option was the development of an industry standard qualification to enable brokers to demonstrate a base level of knowledge in the short-term and commercial lending environment. My personal concern with this is that the ability to pass an exam and secure a qualification does not necessarily translate to the provision of structured and appropriate solutions for clients. Securing credentials that one can put on a business card may demonstrate a base level of knowledge, but in

“I think we should be looking beyond CPD to identify a more practical route to the ongoing development of high standards” this market, on the job experience is absolutely crucial to being able to deliver the best customer outcomes. This is one of the reasons why professional advice will remain vital for customers, and why I doubt we will ever see technology take the place of our vibrant intermediary sector. With this in mind, I believe the best route to take is one of continued on the job training. Of course, we already have the regulatory requirement for continuing professional development (CPD), but I’m not convinced that CPD is enough on its own. After all, it often only takes attendance of a few webinars or events to meet the minimum CPD threshold, and similar to the limitations of a professional qualification, it’s difficult to see a direct relationship between

this and actively delivering a better customer experience. We should be looking beyond CPD to identify a more practical route to the ongoing development of high standards. CONSISTENT STANDARDS

Many firms already have their own version of this, and I’m aware of some very commendable in-house training schemes. The challenge will be whether we can take this approach and replicate it across the industry so that we can create greater consistency and more confidence amongst customers. This is just my opinion, of course. I know that many interested parties will have a different take on what is required and proclaim good arguments for alternative approaches. The really positive thing here is that education and the delivery of more consistent standards is high on the agenda. In many ways, our joint event with FIBA progressed what may evolve into incredibly interesting processes, raising the considerations and identifying both the challenges and opportunities. I am confident that by following this process – with an ongoing appetite to co-operate and collaborate – we will be able to identify a suitable and workable route forward. We are already in a strong position, and thanks to the good works of associations like the ASTL and FIBA, we have nurtured greater standards and an improved reputation for our part of the market. At the ASTL, we will soon commence more detailed activity to help raise awareness and understanding, and to challenge misconceptions about the short-term lending market. If we continue to progress the conversation about education and consistent standards, we will surely succeed in putting our industry in an even stronger position. With this in mind, if you do have any ideas or suggestions that you think we should consider, please do get in touch. We have an exciting opportunity to work together for the good of our sector, and most importantly, for the benefit of our customers. B I

Every type of bridging, just simpler Auction Bridge-to-Let Development Development Exit Land Bridge Residential Bridge Commercial Bridge Whatever your need, we’re ready to fund it.

Property finance made simple. LendInvest Limited is registered at 8 Mortimer Street, London, W1T 3JJ (Company 08146929). Your client’s property may be repossessed if they do not keep up repayments on their mortgage. For intermediaries only.

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Bridging Introducer – July 2021  

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