The last decade has seen a significant reduction in the power of traditional banks over businesses and individuals. Historically, high street/business banks were the only place to go for those seeking bridging loans and property related finance. However, the introduction of crowdfunding has changed this with companies such as BridgeCrowd able to offer secure finance on extremely favourable terms.
The beauty of crowdfunding is not only the favourable terms on offer, through cutting out the middlemen, but also the speed at which this type of platform operates. Bridging loans of anywhere between £25,000 and £2 million can thankfully be arranged quickly because as we all know, speed is often of the essence. On average it takes 30 minutes to approve a loan in principle, 24 hours to complete for an existing customer and 10 days for new customers. There is also the opportunity to fast-track funding of an emergency nature.
So far BridgeCrowd has lent in excess of £100 million with no capital losses to date. All loans are underwritten using first, second and third charges on land, property or other acceptable assets – with a maximum loan to value (LTV) ratio of 70%. This ensures sufficient headroom in the event that a customer falls into financial difficulties and allows competitive borrowing rates to be offered.
The ability to organise peer-to-peer transactions is key to crowdfunding, matching investors and borrowers in an instant. Those looking to invest in bridging loan transactions can expect an average return of 12% secured over UK property. The proviso that no borrowing agreements will breach the 70% loan to value ratio offers an extremely valuable degree of security. As with any investment transaction, there is a degree of risk to capital but the average interest paid to investors is around 1% per month or 12.68% annually. The average term for BridgeCrowd funding is six months with a maximum 12 month term.
These relatively short timescales, in line with traditional bridging loan criteria, offer an added degree of security/confidence when considered together with the level of asset security. When you bear in mind the current interest rates in the UK and basic rental yields on UK property, an average return of 12.68% is extremely attractive.
Success breeds confidence
Crowdfunding platforms such as BridgeCrowd continue to grow as confidence in the services they offer and the rates available for both sides of any transaction compare favourably to alternative options. Due to the nature of asset security, and the relatively short bridging loan term, BridgeCrowd can accommodate those who have perhaps struggled with mainstream finance due to a challenging credit history. Is also worth noting that each borrower is required to forward details of at least one exit plan to ensure the loan is refunded in full within the term period.
In theory, crowdfunding is a relatively easy operation, simply matching borrowers against investors with their relatively low cost base allowing BridgeCrowd to offer attractive rates to both parties. All underwriting transactions and asset charges are ring fenced from the main business offering another level of security for clients. There are few financial operations which can boast a loan book of in excess of £100 million with no capital losses to date.
When time is of the essence, and every interest rate point places pressure on cash flow, more and more borrowers are turning to BridgeCrowd. Bridging loan and refinancing options, speedy decisions for existing and new customers with a detailed, clear and concise mission statement, it is no surprise that traditional banks have begun withdrawing from the bridging loan market.
• 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