"Some of the lenders in the sector have repeatedly come up with new products to meet market conditions and customer need – products which aren’t really a bridging loan as we know it."
In the world of specialist lending, the term ‘bridging’ has long been synonymous with short-term loans used to facilitate property transactions. However, recent trends highlight that there is in fact a much wider spectrum of financial products being covered by the broad umbrella term of bridging loans.
Essentially, while industry data indicates consistent growth in the bridging sector, a closer inspection reveals a significant portion of these loans in fact deviate from traditional bridging models and could be better described as alternative lending solutions.
The most recent data from the Association of Short Term Lenders (ASTL) underscores the consistently upward trajectory of the short-term lending market. Notably, the final quarter of 2023 witnessed a substantial surge, with bridging loan books reaching a record high of £7.6 billion, marking a notable increase of over 16% from the preceding year. Moreover, completion figures soared by 18.4% in the same period, signalling robust activity within the sector.
I don’t believe that all this growth in the bridging sector is due to increased demand for a ‘simple’ regulated or non-regulated bridging loan; instead, it’s because some of the lenders in the sector have repeatedly come up with new products to meet market conditions and customer need – products which aren’t really a bridging loan as we know it.
Beyond the traditional
At Alternative Bridging Corporation we have seen an increase in activity during the first months of 2024, despite prevailing challenges such as escalating transaction times due to conveyancing delays. I believe this is down to many things - including being a prominent and long-standing player in the market, our excellent service and innovative marketing - but what is key is that we go beyond traditional bridging, offering a diverse array of financial solutions tailored to meet varied client needs.
To illustrate: one of our non-core ‘bridging’ products, the Alternative Overdraft, is very popular with brokers and their clients. It stands out for its flexibility, providing clients with a seamless drawdown facility to access liquidity as and when needed, without having to go through an application process every time they require funds. Understandably, the product appeals to property investors who want to take advantage of opportunities quickly when they present themselves but is also being used to provide valuable finance to the business community.
Similarly, our Part X Property Finance product addresses the demands of property developers, offering pre-consented part exchange facilities to expedite sales and streamline chain breaks. It not only assists with property transactions but also improves property values through refurbishment.
Meanwhile, the introduction of the Alternative Term Loan in the second half of last year further underscores our commitment to innovation. Notable by its absence of Early Repayment Charges (ERCs), this product caters to borrowers seeking stability amid uncertainty over interest rates. Furthermore, the competitive upfront fee structure makes it an attractive option for investors who like the idea of a term loan but are put off by the large fees that come with many of the products available.
Ultimately, we don’t market the Alternative Overdraft, our Part X Property Finance product or the Alternative Term Loan as bridging products, despite them all having some characteristics in common with bridging loans. To us, they are specialist products which provide solutions to clients’ needs.
In the current market, the demand for alternative lending solutions is significant, with SME owners, property investors and developers all looking for finance to suit their particular requirements. This may well be in the form of a short-term loan, but that doesn’t mean it’s necessary ‘bridging finance’. The market continues to innovate and so is it now time to move beyond ‘bridging’ as a catch-all for all short-term property-related lending?
