One of the lessons we have all learned from the COVID-19 pandemic is that the world is an unpredictable place in which nothing is certain. As the lockdown restrictions slowly start to be relaxed, nobody knows what shape the economic recovery might take. But we can anticipate future trends based on some of the many changes that have happened during the lockdown.

I spoke to some members of the ASTL Executive Committee to find out their thoughts on the impact of COVID-19 and some of the trends we might expect to see in the future. The key themes were the resilience of the sector, the importance of technology and the opportunities for residential development in areas that have traditionally been dominated by commercial space.

Here’s what they had to say:

Scott Marshall, Managing Director of Roma Finance: “The industry tone has been rapidly evolving since the pandemic began but the outlook is positive. A counter-cyclical market is developing and those focusing on adapting and innovation will be part of the ‘new normal’.

“The vibes are good in the market, finance searches and enquiries are up, however, there will likely be some fundamental changes moving forward. A new work life balance has been introduced and working from home may become ‘normal’ meaning less requirement for commercial space and in turn, a creation of a brand new type of city centre. Commercial space will become residential, creating opportunities for property investors.

“This future will require investment in technology to allow for new ways to do business and communicate with customers. Those who plan ahead for this now will feature significantly going forwards.”

Stephen Barber, Director at Bridging Finance Solutions: "Yes, we have some tough times in certain sectors ahead, but consumer sentiment will be the key factor in a ‘V’ shaped recovery. With a paradigm shift in working practices I expect a more significant impact on capital values of commercial property."

Gavin Diamond, Commercial Director for Bridging at United Trust Bank: “Technology has been vital in enabling UTB, and many other participants in the specialist finance industry, to continue to function during the pandemic. Our original rationale for investment was to use technology to strengthen our operational resilience and make it quicker, cheaper and easier for borrowers to transact with us.”

All in all, the messages from within the sector seem very much to sway to the positive and this is encouraging. Much will depend upon how the Government is able to deal with the serious debt mountain it is accumulating throughout the crisis in order to provide the ability for businesses to stay alive whilst facing limited or no income during the shutdown.

It is also worth remembering that, whilst bullish about the future, the bridging sector will still rely on the viability of exit routes needed to repay the short-term borrowing. Especially where these exits are dependent on the provision of traditional mortgage options.

Vic Jannels, CEO of the ASTL
A version of this article appeared in the June online edition of Specialist Lending Solutions  

In April, the international professional services firm, EY published its annual report into the UK bridging market. The research for the report was carried out earlier in the year, before the scale of the COVID-19 crisis was fully realised and, while this has dated some of the results, there are many elements that remain true in the current environment and are likely to continue to do so as we emerge from this pandemic.

One, particularly interesting section of the report, that I would like to focus on, looked at the key customer considerations in choosing a bridging lender. According to the research, 58% of respondents cited “speed of execution” as very important for a customer when choosing a bridging lender, which is consistent with the results of the previous year’s survey.

A further 46% of respondents cited “high quality service from the lender” as a very important consideration, which was up from 37% the previous year, and 23% of respondents chose “funding flexibility” as the most important capability when choosing a bridging lender.

Other key customer considerations included certainty of funds, the ability to deliver and being able to follow through on promises, which suggests that according to the research, customers may in some cases value certainty of funding, speed and quality service over “low pricing.”

Perhaps the most interesting aspect of this piece of research, however, was that over half of the respondents cited “reputation of the lender” as a very important or important consideration. This was particularly true for brokers that transact less than £100m in bridging business each year, which all in probability, will relate to most brokers.

This would indicate that, for bridging lenders, an investment in reputation is not simply a matter of good business ethics or ideals, but an important commercial decision. As I mentioned, this research was conducted at the beginning of the year when the market was firing on all cylinders. And I would argue that, having lived through this period of intense uncertainty, during which many lenders are doing a tremendous job to support brokers, reputation is going to become an even more important factor for brokers when they choose a lender with whom to work.

With this in mind, membership of respected associations, like the ASTL, which require adherence to a strict set of professional standards, must surely be considered as a ‘must-have’ for lenders that are serious about growing their business, rather than a ‘nice-to-have’.

Similarly, for brokers who are choosing the best lender to provide a solution for their clients, trade association membership provides a short-hand way to verify reputation.

Reputation will be considered paramount both lenders and brokers as we emerge from this pandemic and must become a key commercial consideration for all businesses as we move forward together.

Vic Jannels, CEO of the ASTL
A version of this article appeared in the April online edition of Specialist Lending Solutions 

One of the defining comments about the current situation has come from Chancellor of the Exchequer, Rishi Sunak, who said during one of his statements:

“When this is over, and it will be over, we want to look back at this moment and remember the many small acts of kindness done by us and to us. We want to look back this time and remember how we thought first of others and acted with decency. We want to look back on this time and remember how, in the face of a generation-defining moment, we undertook a collective national effort - and we stood together.”

These are important principles to stick to during this period of uncertainty. It is also important to remember, that this period will be over. So, when we emerge from the other side of this crisis. Which of your clients could benefit from bridging finance to help get their plans back on track?

Developers

After years of dealing with uncertainty over Brexit, 2020 was looking to be a very positive time for developers, and the active market in the first two months of the year provided much reason for encouragement. With the market being put on pause, as well as much construction, developers will need to reconsider their options and development exit loan can provide the time they need in order to do this.

A development exit loan is a short-term loan that allows a developer to refinance their completed scheme, often at a lower rate than their development finance facility. This can provide a saving on interest payment and give them more time to achieve the best sales price and most investors also release equity from the scheme to use towards future projects.

Business Owners

Bridging finance can be secured on residential or commercial property to provide a short-term cash injection to help small businesses and SMEs. The government has announced a whole suite of support packages to help small businesses through this period, but for many this support may not be enough to help businesses continue to deliver their plans on the other side of this situation.

As with all bridging loans, it is important that there is a robust and reasonable exit route, which could potentially be refinancing or selling assets in the future. For those businesses that are looking to rebuild and are positive about their future prospects, bridging finance can provide a fast and flexible way of delivering funds.

Portfolio landlords

Again, the government has announced forbearance measures that can help landlords throughout this difficult situation, but there is a good chance that, as we emerge, there will be portfolio landlords who are looking for a fast way to access funds. For some, bridging finance may provide a solution to cover short-term cashflow difficulties that have been caused by rent arrears or unexpected repair and maintenance costs. While, for others, it could be used as a way of expanding their portfolio at a time when the property market is flat and provides opportunities to do so. Whatever the reason, a call to your portfolio landlord clients when this situation does pass, could provide them with a welcome solution to their problems.

These are just three examples of types of clients who could benefit from bridging finance when we emerge from this current situation, which will hopefully be sooner, rather than later. There are many ways in which bridging could provide a fast and flexible solutions to the short-term cash-flow requirements of your clients and there will remain many lenders that are ready and available to help. When it comes to choosing such a lender, I would suggest that ASTL membership is something that all brokers should look for. As with any time, when there is a break in the market, there will be a flight to quality and customers will want reassurance that they are working with robust institutions built on sound foundations. ASTL membership provides brokers and their clients with confidence that the lender will subscribe and adhere to certain standards of behaviour and, while confidence is important at any time, it will be particularly crucial in the market that emerges the current situation.

When this is over, and it will be over, there will be opportunities to help people, and it will be important to work with the right lenders to help you achieve this.

Vic Jannels, CEO of the ASTL

A version of this article appeared in the April digital edition of Mortgage Strategy – Bridging Watch

What a difference a month can make. I am writing this at the beginning of April, with the UK in lockdown and the global economy in the grip of COVID 19. Just a month previously, we knew that Coronavirus was something to be taken seriously, but we had no expectation of what a crippling impact it would have in such a short period.

At the ASTL we undertook our regular quarterly members sentiment survey shortly after the Budget on 11 March. At the time, the Bank of England cut the Base Rate to 0.5% on the morning of the Budget and the headline announcements from the Chancellor all related to the steps the government was taking to help people through the pandemic. It was unsurprising therefore that the sentiment survey recognised the potential disruptive threat posed by Coronavirus. When asked whether they were concerned whether the Coronavirus outbreak would affect their business negatively, 67% of respondents said that they were.

Encouragingly, however, when asked whether they were confident about the long-term prospects for the UK economy, 73% of ASTL members said that they were confident. And 59% of members said that they expected to see growth in the turnover of their business in the next six months, although opinions were divided about the prospects for the sector as a whole, with 37% expecting turnover to increase, 30% anticipating it to shrink and 30% saying they thought there would be no change at all.

Expectations for UK property prices were also positive. While nobody anticipated strong growth over the next six months, nearly 52% of members said that they expected slight growth and less that 19% said they thought prices would fall.

It is likely that a sentiment survey undertaken at the time of writing this article might be a little less optimistic than results delivered in March, but similarly it is worth dwelling on how robust the sentiment was amongst bridging lenders ahead of the pause button effectively being pressed on the UK economy. Every day we can successfully ride out the current situation is a day closer to the return of normality and, while the market will not recover as quickly as it has been forced to contract, we came into this in a strong position and will emerge from it into an environment of heightened demand.

After all, the purpose of bridging is to address a short-term cashflow need and the stasis caused by the Coronavirus pandemic is creating significant cashflow requirements amongst small businesses, SMEs and investors across the country. I would expect brokers and lenders to see increased appetite from developers, portfolio landlords and business owners as the market returns, resulting in a spike in activity that helps the market to bounce back into recovery.

A lot can happen in a short time and, at some point soon, those changes will start to be positive ones as we emerge from this most unprecedented crisis and rebuild on the strong foundations we already had in place.

Vic Jannels, chief executive, Association of Short-Term Lenders

A version of this article appeared in the April digital edition of Business Moneyfacts

The bridging market continues to be open for business, with lenders finding innovative ways to keep lending, as well as working individually with existing customers to identify the most appropriate options for their loans, according to a statement by the ASTL.

Vic Jannels, CEO of the ASTL, says: “It’s at times like these when the resilience and innovation of the short-term lending sector comes to the fore. We have seen lenders introducing new technology and processes to ensure they are able to continue to deliver vital funds for customers, and even received new membership enquiries for the ASTL.

“At the same time, lenders have been working proactively to engage with their existing customers to identify the most appropriate course of action for their circumstances. There will certainly be some customers who are experiencing financial distress as a result of the Covid-19 crisis, and our immediate guidance for these customers is to speak to their lender as soon as possible, so that you can work together towards a solution.

“Notwithstanding the above, it is important for all borrowing customers to remember that they have a contractual responsibility in relation to the interest payments due, subject to the terms of the loan, and to redeem their loans at the appropriate time. Lenders will always be willing to have a conversation with their customers and look to be supportive whenever possible. The current pandemic, however, is no reason to simply ignore your obligations and stop making payments or refuse to communicate with your lender.

Bridging lenders work tirelessly to engage with customers in genuine difficulty but they, in turn, have their investors and funders to consider and, in turn, do not want to be in breach of their commitments. So, our guidance for all customers is to talk immediately to your lender if you are experiencing financial distress. There are often sensible options and ways forward, but these can only be identified by working together.”

Vic Jannels, CEO of the ASTL
A version of this article appeared in the April online edition of Specialist Lending Solutions  

  1. Solutions will be welcome. Once this crisis is over, which of your clients could benefit from bridging finance to help get their plans back on track?
  2. Bridging loan books grow by nearly 20% in 2019
  3. TFG Capital joins The Association of Short Term Lenders
  4. ASTL appoints 2 new Directors