Five ways to mitigate risk on a bridging loan
Over the years the bridging industry has developed a reputation for being a risky market to enter, with so many lenders running into trouble for numerous reasons. At REIM Capital we look to mitigate the risks involved using 5 main steps.
1. Borrower Background
This may seem a rather obvious place to start but many lenders have been guilty of not looking into borrowers’ backgrounds in enough detail. We begin with all our potential borrowers completing a detailed application form to give us an insight into their current circumstances and previous experience. This is followed up by various searches using systems such as Experian and Companies House in order to verify the information supplied by the borrower.
We currently use an approved panel of Valuers when instructing Valuations, this allows for us to use a local valuer wherever the subject property is located who will not be influenced into providing unrealistic values as all reports go through Quality Control before they are provided back to us. Using this Panel also allows us to provide potential borrowers with various quotes from several local valuers who have been through a strict vetting process in order to be on the panel.
Location, location, location. This is always a key part when reviewing a potential loan, it is important that the subject property or site is located in a suitable area so that when it comes to achieving sales in the future you have one less issue to worry about. We will personally attend the subject property at the initial stages of the deal to get a feel for the area and ensure it is suitable for lending purposes as well as following the opinion from the valuer.
4. Local Market Activity
Whilst reviewing any potential deal this is another area we will consider in detail before looking to proceed. Although the valuation will provide us with information on the local area and recent sales activity, we will also undertake an initial comparable search using the expected values for each scheme.
5. Legal Due Diligence
This is the final stage of the process where we instruct our solicitors to carry out the necessary legal requirements to move the deal towards completion whilst also carrying out further checks on both the borrower and property.
By following all these stages, we can minimise the risks and increase the likelihood of a positive experience for both ourselves and the borrowers.
For further information, please visit http://reimcapital.com or telephone +44 203 4884913.