For one reason or another, borrowers may well seek to exit an existing debt with a bridging loan, a move which requires a somewhat out-of-the–ordinary approach. B&C spoke to Joshua Elash, Director at MTF, to find out more about a deal with a difference…

In a bridging finance market which is largely congested and where pricing has become broadly homogenous, we feel it is more important than ever to distinguish ourselves with the quality of our service and our flexible approach. You have to be prepared to listen and to take a common sense approach.

We increasingly see a number of applicants seeking a bridging finance loan in order to take out an existing bridging loan. There are multiple reasons as to why these circumstances may present themselves: in some instances, the applicants themselves were unrealistic about the time that would be required to execute their exit strategy, while in others it appears applicants were not well-informed as to the availability of longer terms.

We see reluctance on the part of other bridging finance companies to provide finance to redeem an existing bridge; in part, we assume this is due a perception that the exit’s risk is higher. Taking a broad brush approach to discounting applications on this basis threatens to prejudice applicants who may have been either ill-informed when taking the original loan, or who just genuinely require additional time.

As a case in point, we recently completed a loan of £850,000 secured by way of a first charge over a mixed residential commercial asset in Ilford. The case, introduced to us by Atlanta Capital, was a classic example of a bridging loan having gone into default which had then begun to spiral out of control. The existing lender had placed an LPA receiver on the asset and fees were rapidly accumulating, in addition to the various interest and other charges being levied. The LTV on the existing facility was sub-50 per cent.

Given the fact that an LPA receiver had been appointed, and the ‘distressed’ nature of the circumstances, the borrowers found themselves looking over a cliff, as the equity in the property was being consumed. The case was such that it was most unlikely that a high street lender would step in. If the bridging industry was unprepared to bridge a bridge, the borrower would be thrown to the wolves.

As non-status lenders, we were, however, not concerned by the ‘distressed’ circumstances. The applicants wanted the time and space to sell the property under normal market conditions. A re-bridge would immediately and significantly reduce their cost of credit, and put them back in control of this income-producing asset. We were pleased to provide the funding required to give the borrowers this opportunity. Common sense dictated that a bridging finance loan was a ‘fit for purpose’ solution to this borrower’s serious problem.

While we receive a large volume of straightforward bridging finance applications every day, we take particular pride in our ability to assist brokers and applicants on the trickier cases where our ability to move quickly and to think outside the box often allows us to provide a financial solution.

Whether it is a development which has stalled due to insufficient cash flow and which requires additional funds to complete, or when applicants who have been let down at the last minute by another lender require finance immediately, we enjoy being given the opportunity to perform.