April 2020
By Sven Peter, Founder, Interbridge
The Bridge Loan market has seen innovations on many levels. Technology has made big inroads into customer on-boarding, finance, treasury and loan management systems and overall lending process improvements.
At Interbridge, like many other lenders we work to improve our customer experience by introducing automation and digitalisation in various aspects of our customer on-boarding process. Specifically, we are working with digital recognition and open banking software to enhance customer experience and speed up underwriting.
Valuation disconnects can be a subject of some friction between customers and lenders. At Interbridge we recognise this and the challenges that this creates. The Interbridge approach to resolve this is that we have invested heavily into developing a genuine opinion neutral Automated Valuation Model which we seek to launch in May. Once testing is completed we want our customers to be able to access our AVM through our website at www.interbridge.uk . Although the AVM does not substitute the need for a tailor-made lender valuation it is instant and can be used early on in a loan enquiry process prior to committing on expensive lender valuations. We believe that this will be hugely helpful in maintaining a transparent and efficient enquiry relationship with our customers.
Another change which we encourage at Interbridge is training and standards for lenders and intermediaries. We believe that the industry is still fragmented and barriers to entry continue to be moderate. The bridging sector has scope for improvement on code of conduct, loan underwriting and other standards. We are hopeful that our trade bodies such as FIBA, NACFB and ASTL will soon present some guidance to all on training and standards.
We are seeing disruptive innovation in bridge lending with the emergence of P2P lenders creating marketplaces for fractional investments into individual loans. The market has recently experienced some set-backs but the underlying business model of creating closed end market places for bridging loans will stay with us and see some volume after Covit-19. However, I expect the P2P funding model to transition away from retail investors to institutional loan purchase platforms.
At lender level the past three years have allowed for a diversification of funding base. The wholesale funding market has migrated from HNW individuals and family offices to levered bank funding lines and credit funds deploying capital for warehouse loan purchase lines. At Interbridge we believe that this is an important contributor for the bridge lending market to migrate from a “quirky niche” to a well-funded, professional lending sub-space. Borrowers and intermediaries have much more choice in their lender selection than they used to have.
In summary, many lenders are working on extensive digitalisation. Valuation visibility will be key game changer to improve the efficiency of the loan enquiry processes. Training and common standards across the intermediary and bridge lender sectors will further improve engagement and completion efficiency. Diversified funding and technology enabled marketplace lending will secure good liquidity and efficiently priced lending for customers.
However, in spite of innovation and technology changes taking place we support the findings of the recent E&Y market study that bridge lending requires tailored underwriting and genuine human interface relationships between borrowers, intermediaries and lenders. At Interbridge we firmly believe that borrowers requiring a bridging loan are coming to us because there are aspects of the loan which are non-conventional. Accordingly, we do not believe that technology can replace “relationship lending”.