Broker Trends and Opportunities – February 2025

Bridging Finance clients? Show them the exit.

There are a couple of routes that you can follow when sourcing Bridging Finance for clients – let a lender know your client requires finance and ask them to reach out – or you can help your client \’put their best foot forward\’ for funding and present the detail and information to support their application upfront.

Both broking styles exist in the commercial finance market – we back the latter as adding the most value to your clients and providing you as the advisor with the most opportunity to successfully place business.

Particularly important with a refurbishment or conversion bridging loan, there are some base details that the lender will need to understand the case upfront:

Client Profile

• Full Name and Contact Information: Basic but essential for all communications.
• Credit History
• Income and Employment Status/Assets and Liabilities: The applicant type (personal name / limited company SPV) will determine what a lender is looking for here.
• Experience: Current property portfolio/experience with refurbishment or conversion of properties – no experience can be acceptable, but evidence the experience of the contractor that will be used to carry out the works.

Property Details

• Current Property Value/Purchase Price: An independent valuation report of the property to be refurbished or converted, or if the property is being purchased, the agreed purchase price.
• Planned Refurbishment/Conversion Details: A comprehensive outline of the planned works, including architectural plans, contractor quotes, and timelines.
• Estimated Gross Development Value (GDV): A projection of the property\’s value after the refurbishment or conversion, often provided by a professional valuer.

Loan Requirements

• Loan Amount: The total amount needed, including the percentage of the purchase price (if applicable) and amount of refurbishment works costs the client requires funding.
• Loan Term: The expected duration of the loan, typically between 6 and 18 months – and remember time contingency for any unforeseen delays!
• Interest Payment Preferences: Whether the client prefers retained interest (deducted from the initial loan draw down amount), rolled-up interest (paid at the end of the term) or servicing the loan interest with monthly payments.

Proving a Viable Exit Strategy

As excited as you and the client are about the project and arranging the finance to make it happen – the bridging finance lender is already looking at the exit! Proving a viable exit strategy to the lender up-front is crucial.

A viable exit strategy is critical for securing a bridging loan. It reassures the lender that the loan will be repaid within the agreed term. These are the key elements to include:

Sale of Property

• Local Market Analysis: A detailed analysis of the local property market, input from local estate agent/s to support projected Gross Development Value (GDV).
• Marketing Plan and Sales Timeline: A strategy for marketing the property, including a forecast timeframe to achieve the sale.

Refinancing

• Mortgage Pre-Approval: Lenders can require a Decision in Principle (DiP)* as evidence of pre-approval for a long-term mortgage to replace the bridging loan based on the projected value and rental income.
  *Lenders appreciate that the DiP will not be valid for the 6-18 months of a bridging loan term – it is for up-front evaluation.
• Financial Projections: Detailed financial projections showing the client\’s ability to service the new mortgage, including rental income, if the property will be let.
• LTV Ratio: The loan-to-value ratio of the new mortgage, demonstrating that it will cover the bridging loan amount.

Contingency Plans

Backup Exit Strategies: Having multiple exit strategies can reassure the lender. For example, if the primary plan is to sell the property, a backup plan could be refinancing or selling another asset.

Some further examples of back up exit strategies are:

• Investment Income: Proof of income from investments that can be used to repay the loan.
• Business Profits: Financial statements from the client\’s business showing sufficient profits to cover the loan repayment.
• Sale of Other Assets: Documentation of other assets (e.g., another property, shares) that can be sold to repay the loan.
• Emergency Funds: Proof of emergency funds or a line of credit that can be used if the primary exit strategy is delayed. 

In conclusion

As ready as you are to arrange a bridging loan for property refurbishment or conversion – which requires meticulous preparation – also be ready to show the bridging finance lender a clear exit strategy.

By gathering comprehensive up-front information and demonstrating a viable plan for repaying the loan, brokers can significantly increase the chances of loan approval.

Remember, the key to success lies in detailed planning, transparent communication, and having multiple exit strategies to mitigate risks. With these elements in place, brokers can confidently guide their clients through the bridging loan process and significantly increase the chances of a successful outcome.

Mark Grant, Managing Director, Fiducia Commercial Network.
February 2025.

About Fiducia Commercial Network

Fiducia Commercial Network is a commercial finance \’Appointed Representative\’ network created to allow independent firms to provide commercial property finance and trading business finance options to their existing client base and network.

Joining the network provides opportunities for professional brokers to offer a full range of commercial finance solutions by acting as an Appointed Representative (AR) with the full support of the Fiducia Commercial Network team.

The Fiducia Commercial Network membership includes FCA authorisation and reporting, PI insurance, and NACFB membership, plus business, compliance, finance, system, and admin support from a company with over 20 years\’ experience in commercial finance.

If you\’d like to discuss joining Fiducia Commercial Network or you\’d like to apply to become an Appointed Representative…

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