What is a Bridging Loan Lender

By Stephen Clark | Wednesday 27th December 2023 | 9 minute read

A bridging loan lender is the source of the finance that funds a bridge loan.

The 4 types of bridging loan lenders are private lenders, family offices, private equity firms and institutional lenders such as banks. Each type of lender offers varying degrees of loan terms affecting the size of loan, the length of the loan term, rates and conditions attached to the lending of the bridging loan.

Thinking About Going Direct To A Bridging Lender

Can I go direct to a bridging lender?

No, not always. Bridging loan lenders either accept bridging loan enquiries directly from the borrower and/or require the borrower to enquire via a bridging loan broker. Where a lender has a niche product criteria, they prefer dealing with brokers than borrowers directly because the likelihood of the borrower's requirements matching the lender's criteria is low. Many niche lenders are small in size and therefore don't have large sales teams or call centres able to manage high volumes of inbound calls from new enquirers. 

What is the benefit of going direct to a lender?

There's one significant benefit from going direct to a bridging lender and that is you'll not have to pay bridging broker fees.

Sounds great right? Well, before you take this route, there's one significant consideration you should be aware of before you contact a bridging lender - and you probably have never heard of it - it's called deal fatigue.

What is deal fatigue?

A phrase in the market called 'deal fatigue' can occur when a bridging loan lender reviews either the same bridging loan application from the same borrower or multiple variations of the loan application from the same borrower. 

In the world of bridging finance, deal fatigue can arise from a challenging loan application that has been presented to multiple lenders. This is especially true of complex property developer loans such as a bridging loan for property development or development finance. This loan application fatigue specifically manifests when various lenders have previously reviewed a similar application from the borrower or multiple variations of one. Consequently, these lenders may no longer be inclined to reassess the application, even if there have been subsequent modifications that render it distinct from their initial evaluations.

Key factors contributing to deal fatigue in this context include:

Repetitive Submissions: The borrower may submit similar or slightly modified applications to different lenders in pursuit of the most favourable terms. However, the lenders, having already reviewed a comparable application, may grow fatigued by the perceived repetitiveness and, as a result, be less motivated to reevaluate subsequent submissions.

Lack of Fresh Perspective: As lenders encounter similar applications from the same borrower, there is a risk that they may form preconceived notions about the borrower's financial profile or the nature of the transaction. This can lead to a lack of enthusiasm for revisiting the application with a fresh perspective, even if substantive changes have been made.

Diminished Interest: The cumulative effect of multiple lenders deciding against pursuing the initial or similar applications may contribute to a general decrease in interest among potential lenders. This can create a challenging situation for the borrower, as the perception of diminished appeal may persist even when the actual application has evolved.

Risk of Application Disregard: Deal fatigue in the context of bridging finance can potentially result in lenders opting not to review subsequent applications, assuming that they align with previously disregarded submissions. This poses a risk of the borrower's application being overlooked, even if it presents a new and potentially attractive proposition.

To navigate deal fatigue stemming from a challenging loan application offered to multiple lenders, effective communication and transparency become crucial. Borrowers should proactively communicate changes in their financial circumstances or modifications to the transaction structure to ensure that lenders are aware of the evolving nature of the application. Additionally, working with experienced financial advisors or mortgage brokers can help present the application in the best possible light and highlight the unique aspects that differentiate it from previous submissions, potentially rejuvenating lender interest.

How do I avoid deal fatigue?

Getting to the right lender first time is crucially important for borrowers - and not just when the loan needs to be completed quickly. Knowing the which lenders will want which loan applications is one of the benefits of a good bridging loan broker, and it helps avoid deal fatigue. 

Why do lenders get deal fatigue?

It costs time and therefor money for lenders to review any and all finance applications. If the lender has already seen a loan application, and rejected it, that will be because of several reasons.

The reasons why a bridging finance application may be rejected or declined.
Bridging finance applications may be rejected for a number of reasons, but the basic top two reasons are due to:

  1. The loan application not meeting the lender's requirement
  2. The borrower not meeting the lender's requirement

Let's look at these in more detail.

  • The loan application may not meet the lender's requirements for the following reasons:
  • The loan value may be too high or too low.
  • The loan-to-value of the security may be too high.
  • The type of security may be outside of the lenders speciality
  • The duration of the loan may not be aligned to the lenders deal flow

The borrower may not meet the lender's requirements for the following reasons:

  • The borrower is already known to the lender and been previously rejected
  • The borrower fails an anti money laundering check
  • The borrower fails a credit check because they've previously defaulted on other loans
  • The borrower is deemed not reliable enough to pay back its loans
  • For regulated bridging loans, the borrower's income falls short of affordability checks like debt-to-income ratio.

What is a lenders deal flow?

A lender's deal flow refers to the volume and frequency of investment opportunities or transactions that a lender evaluates, processes, and potentially funds over a period. In the context of bridging lending, such as in the financial or real estate sectors, deal flow is a critical metric that reflects the pipeline of potential deals and the overall activity of the lender. The term is commonly used in venture capital, private equity, family offices and other financial sectors. Here are some key points related to a lender's deal flow.

Can a lender's deal flow affect whether they want to lend to me?

Yes. Lenders are businesses that rely on placing funds into the market to obtain a return on investment via interest and fees. Any given lender will only have a limited amount of money to deploy at any given time - they do not have unlimited funds.

As such, lenders look at the quality of all the finance applications for a given period and choose the ones that offer them the best return on investment, best meet their risk profile, best suit their lending strategy or a combination of all three.

What's a regulated bridging lender?

A regulated bridging lender is a finance provider that offers bridging loans under regulatory oversight and compliance. In the context of UK financial services, "regulated" refers to being subject to regulatory authorities and laws that govern lending practices that are regulated by the Financial Conduct Authority (FCA).

Here are some key points about regulated bridging lenders:

FCA Regulation: In the UK, the FCA regulates certain types of loans, including some bridging loans. The regulation is designed to ensure that lenders adhere to certain standards and treat borrowers fairly. This regulatory oversight aims to protect consumers and maintain the integrity of the financial system.

Consumer Protection: When a lender is regulated, borrowers may benefit from increased consumer protection. This can include transparency in terms and fees, clear communication, and adherence to responsible lending practices.

Criteria for Regulation: Not all bridging loans are regulated. The regulation typically applies when the borrower is an individual or a small business, and the loan is secured against a property that is or will be occupied by the borrower or their immediate family. Loans to larger businesses or for commercial purposes may not fall under the same regulatory framework.

Compliance Requirements: Regulated bridging lenders need to comply with specific rules and requirements set by the regulatory authority. This can include conducting affordability assessments, providing clear and accurate information to borrowers, and ensuring fair treatment throughout the loan process.

It's important for borrowers to understand whether a specific bridging loan falls under regulatory oversight and to be aware of the protections provided by such regulation. If you're considering a bridging loan, especially if it involves properties that are your primary residence or that of your family, you will need to work with a regulated lender.

What's an unregulated bridging lender?

An unregulated bridging lender is simply one whose business activities are not being overseen by the UK financial services authority, the FCA. Not all types of bridging loans are regulated by the FCA. The regulatory status depends on factors such as the purpose of the loan, the borrower, and the type of property involved.

Here are some key points about unregulated bridging lenders:

Lack of Regulatory Oversight: Unregulated bridging lenders operate without being subject to specific regulations imposed by financial authorities. As a result, they may have more flexibility in terms of the types of loans they offer and the criteria they use to assess borrowers.

Commercial Transactions: Bridging loans for commercial purposes, such as those involving non-residential properties or large businesses, may often fall into the category of unregulated loans. These loans are generally considered to be for business purposes, and the regulatory protections afforded to consumers may not apply.

Less Stringent Criteria: Unregulated lenders may have fewer restrictions on their lending criteria compared to regulated lenders. This flexibility can be beneficial for certain borrowers, such as businesses seeking short-term financing for commercial property transactions.

Risk Considerations: Borrowers dealing with unregulated bridging lenders should be aware that they may have fewer consumer protection measures compared to regulated loans. It becomes essential for borrowers to thoroughly understand the terms of the loan, including interest rates, fees, and repayment conditions.

Professional Advice: Due to the potentially complex nature of unregulated bridging loans, borrowers are often advised to seek professional advice from financial advisors or legal experts familiar with commercial finance.
It's crucial for borrowers to carefully assess their needs and the nature of the transaction when considering a bridging loan. Whether dealing with a regulated or unregulated lender, clear communication and a thorough understanding of the terms are essential to making informed financial decisions.

Who lends bridging finance?

Bridging loans are offered by a variety of lenders including some banks and institutions, as well as many alternative finance providers such as:

Specialist Bridging Finance Lenders:

Lenders exist who specialise only in providing bridging loans. These lenders often have a streamlined process for quick approvals and disbursements, making them a popular choice for borrowers in need of fast financing for property transactions.

Alternative Finance Providers:

Non-traditional or alternative finance providers, including peer-to-peer lending platforms and crowdfunding platforms, may offer bridging loans. These lenders often provide more flexible terms and may be open to financing unconventional or unique transactions.

Specialist Finance Companies:

Some finance companies specialise in short-term and bridging finance. These companies may cater to specific industries or types of transactions and can provide customised solutions.

Private Banks:

Private banks may offer bridging loans, particularly for high-net-worth individuals or businesses with substantial assets. Private banks may provide more personalised service and tailored solutions.

Banks and Traditional Lenders:

Many traditional banks provide bridging loans as part of their lending services. These loans may be available for both residential and commercial purposes. However, the approval process with traditional lenders can be more rigorous, and the timeline for loan approval may be longer.

Mortgage Brokers:

Mortgage brokers can assist borrowers in finding suitable bridging loan options by connecting them with various lenders. Brokers have access to a network of financial institutions and can help navigate the complexities of securing bridging finance.

When seeking bridging finance, it's important for borrowers to carefully consider their needs, the purpose of the loan, and the specific requirements of the lender. Interest rates, fees, and repayment terms can vary widely among lenders, so shopping around and comparing offers is advisable. Additionally, seeking professional advice from financial advisors or mortgage brokers can help borrowers navigate the process and choose the most suitable option for their circumstances.

Do all lenders lend commercial bridging loans?

No, not all lenders offer commercial bridging loans, but there are many finance lenders who do. A commercial bridging loan is typically a short-term loan secured against a commercial property or group of properties. They are commonly used in real estate transactions or for commercial purposes, and can help businesses or individuals secure finance quickly. Terms, eligibility criteria and bridging loan rates can vary widely among lenders, so it's advisable to seek a broker's assistance to access multiple loan offers before choosing a lender. Commercial bridging loan brokers can help you navigate the options available in the market and find a solution that suits your specific needs.

Second charge bridging loan lenders 

Second charge bridging loans are a type of short-term financing where a lender takes a second charge on a property that already has an existing mortgage. While not all lenders offer second charge bridging loans, there are bridge finance providers such as specialised lenders that provide this type of financing. The availability of these loans can vary depending on the region and the lender's policies. If you're seeking a second charge bridging loan then contact us today for expert assistance.

Final Thoughts

Understanding the landscape of bridging loan lenders is crucial for anyone considering this form of short-term financial solution. From private lenders and family offices to private equity firms and institutional banks, each type of lender brings unique terms and conditions to the table.

While direct engagement with a lender can save on broker fees, it's essential to be mindful of the pitfalls like deal fatigue, which can arise from repeatedly presenting similar loan applications. Getting the best bridging loan deal, whether regulated or unregulated, requires a solid network of lenders and a clear grasp of the their criteria and even their deal flow. Engaging a skilled bridging loan broker can be invaluable in this process, helping to match borrower's needs with the right lender and avoiding unnecessary rejections or delays. Ultimately, whether for commercial purposes, property development, or securing a second charge loan, the key to success lies in a well-informed approach, understanding the nuances of the market, and choosing the right partner for your bridging finance needs.

We're experienced financial brokers who have an extensive network of over 200 UK bridging lenders, including: private equity firms, investors and family offices.

Get expert assistance today to securing your short-term bridging loan. We're on hand to answer any questions.

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