Recent analysis has revealed that property developers could be missing out on significant funding opportunities by not comparing lenders when seeking bridging finance. This oversight can lead to substantial financial implications, with differences in loan offers reaching as high as £1 million across various lending scenarios.
How Much Can Developers Lose with Bridging Finance?
The analysis conducted on 300 simulated searches highlighted alarming discrepancies in loan offers. For instance, bridging loan searches on a £1.4 million residential purchase in London showed a staggering £333,159 difference between the most and least competitive lenders. This gap represents a 52% variance in the amount lenders are willing to advance, which can significantly affect a developer’s cash flow and project execution.
What Are the Average Differences in Bridging Finance Offers?
Further examination revealed that commercial mortgage searches for a £1.5 million retail purchase in the North West yielded a £375,000 difference between lenders. This means that a developer could halve their required deposit based on the lender they choose. In development finance, the stakes are even higher, with offers on a £3.7 million project differing by an average of £842,000. Securing the larger facility could result in a 94% higher return on capital employed, making it important for developers to shop around.
What This Means for Investors and Borrowers in Bridging Finance
For investors and borrowers, the implications are clear. By not comparing lenders, they risk tying up more capital than necessary. For example, an investor with £1.4 million of equity could potentially finance three projects instead of one if they secure the most competitive terms. Over the course of their career, this could translate to completing 30 projects instead of just 10, significantly enhancing their portfolio and returns.
Why Is It Important to Compare Bridging Finance Lenders?
Ian Humphreys, chief executive of Brickflow, emphasizes that many borrowers and brokers still rely on a limited selection of lenders, which can hinder their financial potential. By utilizing technology to compare a wider range of options, developers can ensure they are making informed decisions that maximize their investment opportunities. For more insights, check our bridging finance guide.
Frequently Asked Questions
Why should I compare lenders for bridging finance?
Comparing lenders can lead to significant savings, with differences in loan offers potentially exceeding £1 million. This can greatly impact your project’s financial viability.
How can I effectively compare bridging finance options?
Utilizing a specialist property finance comparison platform can help you analyze various lenders’ offers, ensuring you secure the most competitive terms for your needs. You can also explore bridging loan rates for better insights.