Don’t look back in anger

For those of us who work in property finance, we often tell other people (when asked what we like about our job) how we love the fact that every day is different.

Think about that.

Every day is different…

One day you may have a nice simple bridging loan for a property that a client is buying at auction.

Another day it might be a complex, mixed use development project with retail units, private apartments and affordable housing.

It might be a piece of land with outline planning only but with a rock solid lease agreement from a council already in place.

So as you can see, every day can be different in terms of deal flow and that’s before you factor in all of the conversations and communication with lawyers, valuers, quantity surveyors, media, borrowers and brokers.

This variety is what makes us love what we do. Or certainly most of the people I speak to, be they brokers or lenders.

The vast cross selection of enquiries you receive as a lender means that you invariably will not be able to do all of the deals that come your way. After all, every lender has a set criteria that works for them and of course, they need to adhere to that.

On those occasions that we are unable to lend on a particular project, we often refer the deal to another lender who might or to one of our loyal broker contacts with a wide lending panel and this works well for all parties.

We are still happy because we didn’t let the broker or borrower down. The broker/lender is happy because they have a new deal that hasn’t cost them anything to originate and the borrower is still happy that his dream project will still get funded.

But…There will be deals that neither we, other lenders or our broker partners can fund, simply because they may not work on the financials, the profit is too low, the location isn’t desirable, re-sale values are poor, demand is low or the borrower isn’t considered a good credit risk.

Whatever the reasons (and there is a multitude of them), the simple fact of the matter is that:

Not. Every. Deal. Can. Be. Funded.

For those brokers experienced in residential investment and commercial property finance, this won’t come as a shock but for those brokers less experienced (perhaps coming from an IFA, Asset Finance or residential mortgage broker background) this can be a real eye opener.

On some occasions, these brokers/introducers can get hugely upset with us for saying no to a deal and yet it is only business. We may say no to this one and yes to the next so we certainly don’t get angry or upset, we just move on.

A development project for example can be hugely complex.

We know and understand this and even BDMs we interview often tell us that they are not comfortable dealing with a development finance enquiry, so if they are uncomfortable (and they are already working in short term lending) what chance does a newbie have?

The other thing to factor in is how you convey this bad news to the introducer?

My approach is simple.

I let them know straight away if it is something we can do or not.

The classic ‘quick no’.

I have been doing this a while and consider myself an expert in short term property finance but particularly in development finance.

I enjoy the complexity. The level of detail required to assess a deal puts many people off but I love it (sad but true) and I love it even more when we are able to say yes to a deal.

However, I will say no.

It doesn’t work for us (because of some of the reasons I mentioned previously and many more I didn’t) and that’s not a bad thing if you inform the introducer quickly.

My experience allows me to come to a decision fairly quickly so saying no (or yes) quickly gives the introducer options.

Our loyal introducers that support us regularly understand this and simply move on to the next lender if we say no.

That said, if we are dealing with an experienced developer who has a good track record of buying, building and exiting recent developments, we are keen to lend up to £5m. Up to £10m for the right project.

At the last count, I believe there are approx.174 short term lenders.

Most will only offer bridging and refurbishment but there are still 20+ lenders that offer ground up development finance (approx.10 who lend above £2m), so if we decide here at Stretton Capital it is not for us, the introducer still has a myriad of other options.

So be they a broker or lender…Property finance is important for those working in it but at the end of the day, it’s only business and whether you get a yes which makes you happy or a no which makes you annoyed…Don’t look back in anger and simply move on to the next deal.