Gavin Diamond is finance director at Cheval
A recent survey found that 70% of brokers had not arranged a bridging loan in the past 12 months.
While I accept that such polls are not always fully representative of the market, it does suggest that a large proportion of the broker market is currently completely untapped by bridgers. And, more to the point, it implies that there are an awful lot of borrowers missing out on funding where a bridging loan could be a suitable funding solution.
Despite the fact that bridging can be extremely effective in the current climate as a means of getting transactions financed, the research shows that nowhere nearly enough brokers are plugging into the market.
So what are the key reasons for this low take-up of bridging among brokers?
I have to say that quite a bit is down to a lack of knowledge, or understanding, on the part of some intermediaries as to how bridging operates.
You would think that this should not be an issue any more, given the fact that bridgers have invested a lot of time and money in educating intermediaries over the years. At Cheval, we have done our fair share of broker education - via national roadshows, network and mortgage club training sessions, and spreading the message at individual brokerages - but obviously there is an awful lot that remains to be done.
Also playing a part in the low uptake is the negative perception that many brokers still appear to have of the short-term lending market. It pains me to admit that some brokers appear to be stuck in the past, retaining an unflattering view of the sector. Their image of bridging is light years away from the actuality.
The survey’s findings do give me reason to be hopeful though. I am particularly taken by the fact that those brokers who were involved in bridging seemed to be doing very well at it - 21% questioned arranged more than 11 bridging loans during 2010. This neatly shows what potential there is if brokers appreciate how bridging can be used.
In other words, if you take the time to explore its potential within your client base, you stand to generate a significant revenue stream in addition to providing a valuable service to your clients. Eleven or more cases are likely to be pretty rewarding, given that intermediaries have the opportunity to earn twice from a bridging deal – from the bridging loan and from the financial product that repays the bridging loan.
I believe that the factors hindering the development of bridging can largely be addressed by better education: firstly, about the way bridging works and, secondly, about how the leading providers are FSA-regulated, follow TCF principles and are members of the Association of Short-Term Lenders.
To intermediaries reading this column, the question must be: can you afford not have an income stream from bridging, with mortgage deals pretty thin on the ground?
If you can, all credit to you. If you can’t, then please phone me or one of my colleagues and we’ll gladly help get you on the fast track to earning a lucrative income from this growing sector.
