What do brokers and clients need to consider?
With traditional lenders being unable or unwilling to meet the funding demands of skilled property professionals, specialist lenders such as BFS are the lenders of choice.
It is critical that brokers and clients have a robust understanding of a lender’s source and depth of funding to ensure they are securing borrowers the right type of financing. Underpinning everything is the variety of funding lines available to lenders.
- How much money do they have and how quickly can they access it?
- Does the lender have absolute discretion over the money they lend?
- Are they reliant on recycling funds before they can write new loans?
The more successful and long standing lenders will have secure lines of credit. When it comes to considering which lender is best suited, brokers and clients need to ask key questions such as:
- “Do they have a proven track record?”
- “Have they lent through the tougher times and emerged in a stronger position?”
- “How do they treat borrowers if things don’t go to plan?”
The answers to these questions will tell you a lot about a lender, their ability to deliver and how they will treat you and your client once the loan has completed, regardless of difficulties and challenges.
Brokers and clients should also consider the type of loan they are placing and look carefully at the experience that the lender has of delivering such loans. Take development and refurbishment finance for example, has the lender dealt with the complexities that often arise once a build is underway? For development or refurbishment finance, brokers and clients should also consider whether there is any risk of the lender getting cold feet halfway through and the security of their funding lines.
We’ve seen developers left high and dry as funding is pulled before the scheme is anywhere near completion. Added to this, the best lenders will have talented teams that really understand the wider property market, ideally combining a mix of property and financial services backgrounds. Construction and labour costs, monetary policy, warranties– all of these impact on the development process and should be factors when working in partnership with a client to deliver a successful project.
The best brokers need to be constantly considering the above, taking an almost forensic approach to their decision-making process and successfully navigating the lending landscape. By doing so, they’ll avoid poor lenders, ensure that their clients get an optimal financing solution and be doing business with them for many years to come.
