Beware of Yes lenders!
Jonathan Sealey is chief executive of Hope Capital
We have seen an increase in borrowers coming to Hope Capital because they have been let down by other lenders. Typically these borrowers have been to another lender who has said yes straight away, but then reneged on this when it comes to paying out the money, leaving the borrower distressed and anxious.
It increasingly appears that some lenders say yes initially without properly looking into the deal, then a week or two down the line, when they’ve looked in more detail, they realise that it is not something that they can lend on and then have to find a reason to say no.
This would be bad enough if it was a standard long term mortgage, but very often one of the reasons that the borrower has gone to a bridging lender in the first place is because they need speed of turnaround. Some cases actually go from application to completion in little more than 48 hours, so for a borrower to find out two weeks down the line that the loan will no longer go through could jeopardise what deal they are doing, potentially costing them thousands of pounds.
Brokers can be absolutely key in helping their clients avoid such scenarios, by getting to know the lenders that deliver on their initial promises and those that don’t. In some cases a lender having to go to an outside credit committee can put a loan at risk of refusal later down the line, so it is often far better to use a lender that has its own source of funding.
Of course not every decline is down to the lender; if the borrower has not declared everything they should up front then they will jeopardise their loan themselves. Brokers can also play a key role here by making this clear to the borrower at the outset. Even if the borrower has had an instance of non-payment or adverse credit, if the lender knows up front then they can weigh up of what relevance it is, and may still lend to the borrower if they have a good clear exit strategy. If the borrower doesn’t declare this up front and the lender finds out later they will be unlikely to lend, no matter how minor the default. Bridging is very much based on a trust relationship and if the borrower hasn’t been honest about one thing it raises the question about what else they have been dishonest about, or held back on.
If the broker really gets to know their client they can be of significant assistance. They will help their client further by also knowing the lenders who say yes and mean it and those who say yes but may change their minds. While service and delivery is everything, cheapest is not always best and there is no replacement for good knowledge of the market and the lenders within it.