This month, Lawrence Stephens’ Partner Gregory Palos and Trainee Solicitor Alex Duncliffe-Vines contributed to the Association of Short Term Lenders (ASTL)‘s monthly newsletter. Their joint article takes a look at how to create a more efficient completion process, and is available below for your reading. As always, if you’d like to discuss any of the points raised in this article, please do not hesitate to get in touch using the details at the bottom of the page.
Creating a more efficient process in the completion of bridging loans
The need for fast and flexible specialist finance options in the form of bridging loans has surged since the financial crisis in 2008/09 and is in demand more than ever given the economic impact of Covid-19. Their flexible and fast approach has been vital for those borrowers who have suffered delays from the traditional mortgage provider. However, there are still inefficiencies in the completion of bridging loans and this article will list some of those issues which threaten to derail a bridging loan and the solutions which will prevent them from arising.
Lack of Transparency
At the outset of the transaction all of the salient information regarding the borrower’s financial circumstances should be made available. Any ‘issues’ will almost certainly come to light which will inevitably lead to delays. Borrowers should be upfront and honest with the lender at the outset about any potential financial difficulties.
Borrowers habitually and understandably want to instruct their usual conveyancing solicitor. The bridging world is a specialist one and needs to be recognised as such. Too many delays arise with the borrower’s solicitor arguing about the process or requirements rather than getting on with the job at hand. Some lenders are now taking the Dual Representation route.
It is surprising how many cases are delayed around KYC issues. Borrower’s solicitors raise their clients KYC security requirements and delays arise whilst the borrower’s solicitors try to get the information. If everyone in the chain was familiar with these requirements and borrowers briefed at an early stage as to what to supply their solicitor this would help.
Funds on Account
Delays arise when the lender’s solicitor asks for an undertaking for costs. It can often take a week or more for the borrower’s solicitor to provide for this. Many lenders publish their solicitors fees. Encouraging the borrower to put his solicitor in funds as early as possible would solve this. Of course, many borrowers approach more than one lender at the time and hold out on putting their solicitor in funds until the last moment when they actually decide who they are going to proceed with.
Very often issues arise through the due diligence process which requires lender input / credit approval. This often leads to an exchange of emails, which in many cases can take days to resolve. The willingness and ability to take part in conference calls and zoom meetings with instructed solicitors and other interested parties can ensure that these issues are discussed and resolved far more quickly.