Computer says yes….well, actually, no. Sorry
Jonathan Sealey is chief executive of Hope Capital
‘Computer says no’, the phrase made famous by David Walliams’ Little Britain character Carol Beer, was mocking our ‘tick box’ society where sales staff are unable to override a computers’ decision, regardless of whether the answer on their screen makes any sense or not.
The trouble is, comical as Walliams’ satire is, the ‘computer says no’ culture is actually a lot more prevalent than we care to admit. And even worse than ‘computer says no’ is ‘computer says yes’ which then changes its mind to say ‘no’ again.
At Hope Capital, we see a lot of borrowers come to us because they have been let down by other lenders. Either because the computer said ‘no’ right from the off, or worse, that it said ‘yes’ then changed its mind.
More often than not, a borrower will start the process by going to a bridging lender to ask for a loan. That lender has said ‘yes’; straight away, but then, later down the line, have realised that actually, they cannot approve the loan. This is worse than saying ‘no’ at the outset because it leaves the borrower distressed and anxious that the funds they believed they had secured are actually not available after all.
The issue is that many lenders are saying ‘yes’ because the borrower has ticked the initial set of boxes, but then when they have then looked into the customers’ circumstances in more detail, they have realised that their own criteria will not actually allow them to lend to that particular customer.
Now, this would be bad enough if the loan they were looking at was a standard long-term mortgage, but more often than not, the reason the borrower has gone to that bridging lender in the first place is that they need a quick funding solution.
Bridging loans, by their very nature, are short-term, and most borrowers are looking for a very quick turnaround – sometimes little more than 48 hours.
Therefore, if they have gone to a bridging lender who said ‘yes’, then later went back on that, the borrower has wasted valuable time. This makes their already limited timescales ever more constrained when they later try and source alternative funding.
Worse still, if the lender has said ‘yes’ and they get a few weeks down the line and then finds they cannot process the loan, it could jeopardise the deal the borrower has in place, potentially costing them thousands of pounds.
One common reason why a bridging lender may initially say ‘yes’ and then say ‘no’ is to do with where they source their funding. If they are having to use external credit, they will not have the final say on the criteria surrounding the loan, and that could put its availability at risk.
The key learning here for brokers is that they can avoid this type of scenario by getting to know the lenders that can actually deliver on their ‘yes’. That is why it is often beneficial to choose a principal lender – one that has its own source of funding – that can make individual decisions based on each borrowers’ own specific circumstances. That way there is little risk of a ‘yes’ turning into a ‘no’.
And while the proper ‘yes’ men may not be the cheapest on the market, cheapest isn’t necessarily best, and there is ‘no’ point in having a great rate on a loan that never comes to fruition.