BridgeCrowd is a crowdfunding platform which has emerged as a major competitor to the traditional bridging loan providers of years gone by. Each individual loan is considered on its own merits using strict criteria which take into account the borrower’s ability to repay capital and interest, asset security with a maximum LTV of 70% and at least one exit strategy (generally the sale of property or refinancing). However, it is the use of UK property as security against borrowings which is central to any transaction.
In order to ensure all properties are valued on the same basis, with no preference given to borrower or lender, BridgeCrowd only use local surveyors approved by the Royal Institute of Chartered Surveyors (RICS). The use of approved third parties creates an additional layer of transparency with all valuations listed online together with borrowing requests. As all properties are valued on the same basis it is much easier for potential investors to compare and contrast the numerous new borrowing requests.
The criteria used dictates that the LTV ratio cannot exceed 70% so even in the unlikely event of default there is sufficient headroom to ensure capital and interest are repaid in full. This line of security is further enhanced by the relatively short loan periods which average six months up to a maximum of 12 months.
UK legal framework
Even though some borrowers may prefer to offer overseas assets as security against BridgeCrowd funding transactions, the company only accepts UK properties. The UK has a very strict and rigid legal framework with regards to charges over property assets and repossession instructions. This ensures that all parties know where they stand from day one and the potential consequences in the event of financial difficulties/default. Due to the size and fluid nature of the UK property market and the headroom negotiated with the original borrowing facility, a relatively quick sale raising funds to repay all outstanding capital and interest is highly likely.
At this point it is also worth noting that all borrowing agreements and asset charges are ring fenced from the main BridgeCrowd business. This ensures that all such arrangements will be secure in the unlikely event that the main business was to experience any financial difficulties. While this may seem like overkill, it is a common feature of the UK lending market.
As we touched on above, any customer looking to borrow money through the BridgeCrowd platform will not only need to offer security but also at least one exit strategy. The fact that all secured assets are UK based, and can take advantage of the liquid UK property market, should not be underestimated. The more common exit strategies would be a simple sale of property, with bridging loan finance often used for refurbishment purposes, or there may be an opportunity to refinance refurbished property through more traditional routes.
The use of UK assets as security against any borrowings gives confidence to all parties. An extremely liquid UK property market should ensure a swift sale in the event of any issues, BridgeCrowd together with borrowers and investors would be protected by the UK legal system and the use of RICS approved surveyors ensures yet more transparency from third-party valuations. Confidence breeds success in peer-to-peer crowdfunding services and it is no surprise that BridgeCrowd continues to wrestle yet more business away from traditional bridging loan operators.
• All transactions are secured by a mortgage over UK property
• Maximum loan to value (LTV) ratio is 70%
• Properties used as security are valued by a RICS approved local surveyor
• Minimum loan amount is £5000 with no maximum
• Interest is paid monthly with capital repaid when borrower repays the loan
• In the event of default the security property is repossessed and sold as a last resort
• Average loan term is six months
• In excess of £100 million has been lent to customers with no capital losses
• Majority of bridging loans have retained interest and are not serviced
• As interest is paid monthly the LTV rate will remain constant
• Underwriting criteria takes into account a borrower’s ability to repay loan capital and interest
• At least one exit strategy is required (sale of property or refinancing)
• In the event of default the average loan is repaid in full (with interest) within three months of original term date