The latest sentiment survey from the ASTL reveals that members continue to be confident about both the sector and their own businesses, and that this positivity has grown since last quarter.

The majority (78%) of members expect their business turnover to grow, with two thirds (63%) expecting the same of the bridging finance sector as a whole. In addition, they are very positive about the prospects of providing short term finance to SME housebuilders – 93% believe this is a growth area.

However, members are slightly less sanguine about the long-term future prospects of the UK economy, positivity has decreased from 50% in December 2017 to 43%. No less than 52% are unsure and only 11% are negative. This is likely due to the protracted nature of the Brexit negotiations combined with the rise in inflation which in turn is likely to lead to higher interest rates.

Members are split about the direction of property prices, with 52% expecting slight growth and 48% expecting prices to fall. They are lukewarm about the potential impact of the Spring Statement, with 48% neutral and 19% negative.

The ASTL positivity index, made up of a number of factors, continues its steady growth from mid-last year:

 

Benson Hersch, CEO of the ASTL, says “Whilst I remain cautious about future prospects for the UK in a very uncertain world, in which the economic climate can change overnight, members are confident that they will continue to prosper. The use of bridging as a financial tool, both for property transactions and for other business purposes is now well-established.”

 

Press Release April 2018

In Q4 2017, members of the ASTL lent £319.4 million worth of development loans, of which £197.8 million were categorised as bridging. This trend highlights the growing trend for property developers to rely on short term lending solutions.

These development loans exclude what is generally termed “light refurbishment”, such as addition or renovation of bathrooms, kitchens and conservatories as these generally do not require planning permission or extensive structural changes.

Overall, Q4 2017 was a strong period for bridging lenders with an 19.6% increase on the previous quarter and for the first-time completions exceeded £1 billion highlighting the increasing use of alternative sources of finance. With annual completions exceeding £3.5 billion, it is clear that business is booming for ASTL members.

Benson Hersch, CEO of the ASTL says: “The housing crisis continues to be high on the government’s agenda and Sajid Javid highlighted last year that he wanted to do more to support SME building firms. Increasingly these small developers are relying on short term funding solutions, because traditional forms of finance are often not available to them.

"Such a trend demonstrates how alternative forms of finance are providing the solutions where the Government and the banking industry should be and could be bridging the gap.”

These figures are taken from the responses from ASTL members, which include most of the key lenders in the bridging market

Press Release: Tuesday, 20 March, 2018

 

Quarter ended

31 Dec 2017 compared to Quarter ended 30 Sep 2017

  

Quarter ended

31 Dec 2017 compared to Quarter ended 31 Dec 2016

  

Year ended

31 Dec 2017 compared to Year ended 31 Dec 2016

           

Loans written (£)

+19.6%

  

+ 31.7%

  

+24.6%
           

Loan book (£)*

+4.6%*

  

+12.9%*

  

+12.9%*
           

Applications (£)

-11.0%

  

+1.6%

  

+42.6%
           

Loans in default (£)*

-6.3%*

  

-4.7%*

  

-4.7%*

*As at the end of period date

 

          

ASTL quarterly results crash through the £3 billion mark!

In positive news for the sector, the final quarter of 2017 saw the first time that quarterly completions for ASTL members exceeded £1 billion. With annual completions exceeding £3.5 billion, it is clear that business is booming for ASTL members.

Figures compiled by the ASTL’s auditors from its bridging lender members for Q4 2017 have painted a healthy picture of the sector. The value of loans written for the quarter ending 31 December 2017 revealed an increase of 19.6% compared to the previous quarter. Annual completions rose by 24.6% to over £3.5 billion. In comparison to the same quarter last year, the value of loans written in the quarter has increased by 31.7%.

The size of members’ loan books is also healthy. Total loan books are continuing to climb, with a rise of 4.6% compared to Q3 2017. Compared to the end of Q4 2016, the value of loan books has risen by 12.9%, to £3.7 billion.

However, the quarter did see the pace of increases in applications continue to decrease (11%) compared to Q3 2017. While those on an annualised basis are up 42.6% on the year ended December 2016; making up a total of £18.93 billion. Although applications do tend to be unreliable indicators and are dependent on how many lenders are offered the same deals.

Benson Hersch, CEO of the ASTL says: “Our figures highlight that, despite ongoing concerns relating to Brexit and the property sector, the bridging finance industry remains in good shape and is ready and willing to meet the challenges that 2018 may bring.

“The bridging sector continues to provide a vital role in the economy by offering customers access to the capital they need in a responsible and sustainable way. It continues to be an important part of the alternative finance market.”

These figures are taken from the responses from ASTL members, which include most of the key lenders in the bridging market.

Press Release, Monday 26 February, 2018

David Rubin & Partners Ltd joins the ASTL

David Rubin & Partners Ltd, a leading firm of restructuring professionals, has joined The Association of Short Term Lenders (ASTL) as a new associate member. David Rubin & Partners Ltd is the second associate member to join the ASTL since the beginning of the year. Membership of the ASTL now stands at 35 full members and 31 associate members.

David Rubin & Partners Ltd specialise in corporate and personal recovery, restructuring insolvency and guidance around business turnaround and provide quick solutions to underperforming businesses. It offers insolvency advice on a range of issues including corporate restructuring, forensic account investigations, voluntary arrangements and liquidation.

Paul Cooper, Partner at David Rubin & Partners Ltd, added: “We are delighted to be accepted as an Associate Member of the Association of Short Term Lenders and look forward to working with our fellow members to protect their interests, and promote best practice in the industry.”

Benson Hersch, Chief Executive of the ASTL said: “The growing diversity of the ASTL’s membership allows us to promote and protect the interests of our members while making sure the highest standards are achieved. David Rubin & Partners Ltd abides by the same standards that the association operates by and their practical approach, vast experience and depth of knowledge will prove to be a real asset to ASTL members.”

Press Release: Thursday, 8 March, 2018

A director of an invoicing discount finance firm once told me that there was a major difference between invoice discounting credit management and that of bridging finance. In invoice discounting you had to constantly monitor and be wary of the borrower and the relationship is often adversarial. In bridging, the opposite applies – you work with the customer to achieve the best outcome for both parties.

In bridging, a key element is the exit route. Whether this is by refinancing, sale or other method, lenders need to satisfy themselves that the proposed exit is realistic. This means that the underwriting team need to consider a wide variety of issues.

In the case of a sale exit for example, they need to assess the chance of achieving the proposed sale price, the market in the location, the type of property and much more. Where the prospective ultimate purchaser is likely to need a mortgage; are there any location or construction factors which would make obtaining a mortgage difficult? Lenders need to consider if the term and the likely time to obtain a sale coincide. For refinance, bridging lenders need to assess if the refinance proceeds will be sufficient to cover the amount due by the borrower. A high proportion of bridging loans do not require interest instalment payments, as the interest is paid when the loan is redeemed. Any delay in repayment could result in interest and charges significantly eroding the original headroom. This problem is exacerbated when property prices are on a downward curve or when sales are sluggish. When things go wrong, lenders try to avoid litigation, which is not in the borrowers’ best interests.

The issue of affordability does not come into play initially, as no interest instalment payments are required, but it does apply when the borrower is seeking a long-term refinance loan.

Development loans require specialist lender expertise and the ability to step in to complete the project if the original contractor is unable to do so. It’s important to assess the ability of the borrower to carry out the project to completion.

Where practical, most lenders try to see the prospective borrower face-to-face to get a feel for their experience and their ability to meet obligations. It’s also a good idea for cases to be reviewed by more than one underwriter, as sometimes one can get carried away by what seems to be a good deal, without seeing the pitfalls.

Above all, contact with the borrower needs to be maintained on a regular basis to gauge progress of the exit route. If there are problems, it’s essential to have a relationship with the borrower so solutions can be sought well before the end of the loan term. Many lenders have funding lines which make it difficult to extend loan terms.

So, vigilance is a key factor, but so is the ability to assess risk. Bridging is a bespoke financial product which requires human intervention and the skilled underwriters who have a nose for risk will always be needed.

Benson Hersch, CEO of the ASTL

This article appeared in the February edition of CCR Magazine

  1. Method Valuation UK joins the ASTL
  2. Bridging lenders positivity surges as uncertainty around Brexit negotiations slows
  3. How are we doing?
  4. The housing crisis – the long road to a solution