Something we see a lot from client’s is their desire to relentlessly hunt for the cheapest rate, or we hear that “bridging finance is too expensive” compared to other forms of property finance.
There will always be a trade-off between flexibility, speed of completion, simplicity of the application process, and the cost of the money. At one extreme, you may have a no valuation non status loan direct from a family office or private investor, with the cash available in a few days. This type of finance suits some people some of the time, but comes at a price. However, if it means you can take advantage of an urgent lucrative opportunity, or indeed, stop yourself from entering a negative situation, then this could be an acceptable “opportunity cost”.
At the other end of the extreme, you may be offered a super cheap rate, which seems irresistible. However, the very cheap rates are offered by lenders with funding lines from the big banks. This means you have to have squeaky clean credit, the underwriting will be time consuming, slow and often onerous, there is no flexibility outside of their rigid criteria, and often times a faceless credit committee may say no. This may be the cheapest rate, but when it takes two months to complete, and having jumped through multiple underwriting hoops, is this really an acceptable “opportunity cost”.
Instead, when making a decision to use bridging finance, investors should focus on what is genuinely important to them, and what truly represents a viable opportunity cost:
> Speed of decision: many bridging firms have a shallow decision making process, which is critical if you are trying to urgently secure a property deal.
> Flexible criteria: a bridging loan can fund a property purchase when other forms of finance is unavailable, such as when buying under value, or buying a property that is uninhabitable.
> Improved cashflow: interest can be rolled up so you do not service the loan monthly & instead pay everything at the end
> LTV up to 75%: based on the value, rather than the purchase price.
> Non Status: many bridging firms will lend regardless of the credit profile of the borrower.
> Simple underwriting: no proof of income, no bank statements, some lenders don’t even need an application form or a valuation.
Bridging may be more expensive, but please always bear in mind the “opportunity cost”. If bridging allows you to complete a profitable project that wouldn’t otherwise have been possible, isn’t it worth it?
At Tiger Financial, we are bridging loan and development finance experts. Using our granular knowledge of the sector, our experienced brokers work to arrange industry leading funding solutions across residential and commercial properties throughout the UK.
We are fast, reliable and always available to our clients. Just the way you need us to be. Get in touch now to see how we can help your business!