What makes specialist lenders special?
Scott Marshall (pictured) is Managing Director at Roma Finance
As with any property, a good lending business needs to be built on solid foundations. It needs to have a continual programme of investment – in staff, technology and service innovation.
More than at any other time lenders need to evolve how they do business and have the confidence to transform any systems and processes that need refining and to constantly be open minded and to embrace change – and be ready and willing make it happen.
The reasons specialist finance has become more popular with developers and landlords, apart from the continuing inertia of the high street banks, are that lenders are expanding their business models to accept a much wider variety of security for loans, investing in technology to streamline and speed up processes, and making huge strides in delivering a high level of customer service throughout their business.
This ultimately means customers are more willing to pay a bit more for something better, faster and more flexible than the high street can offer.
However, in a crowded market place with increasing competition, no lender can rest on its laurels at any point when implementing their business strategy. There needs to be a management mindset for transformational change and it’s a key factor in whether a business succeeds or succumbs to market forces.
How a lender is funded to provide loans for niche finance is a cornerstone of the business and determines what it can lend on, how much and to whom. But more crucially it provides continuity for customers, knowing that the funding will be there when they need it as a project progresses. There are many types of funding model form private backers, to peer to peer, and of course institutional funding from major blue chip organisations and banks.
While no single source of funding is the nirvana, institutional funding means that the lender is far more likely to have gone through extensive due diligence and the quality of their loan book and business processes will have been put under the microscope to ensure integrity and longevity. This should give a customer far more certainty.
In an ever-changing world, keeping up to date with technical advances is crucial for specialist lenders. Although there can be a big upfront cost, this must be looked upon as a long term investment and could be the difference between a lender growing their business or not. In our sector a lot of emphasis is put on speed of delivery, which, while important, is also a consequence of improving the business and the staff.
New technology can help with developing innovative products catering for a broader security type and customer, building data workflows both internally and with third parties, as well as making decisions such as affordability more robust with new initiatives such as Open Banking. Ignore these advances at your peril, as technology can help deliver efficiencies that can cut costs as well as time and help ensure more satisfied customers.
But opening up these new avenues to lending also requires experienced staff to assess cases and understand the customers’ needs and ability to take on a project. Putting the customer at the centre of decision making can give a lender a very different view of a case and influence whether to lend or not.
Their experience and ability to see a project through is a vital part of a specialist lender’s assessment which also has to include how they can repay the bridging loan at the end of the term. Taking the extra time and effort to understand the customer is what enables specialist lenders provide a more bespoke service.
It’s clear that specialist lenders provide a valuable service to developers, landlords and property investors and the market for their loans has increased in recent years. But to keep specialist lenders fulfilling their needs we must continue to be at the cutting edge of technology and service.
Specialist lenders are capable of responding to any new challenges as they arise and have proven that in the past through some turbulent times. One thing we can’t ever do though is stand still!