BORROWER FAQ’s

how much does it cost?

Costs Upfront

The valuation fee is the only cost up front. This is paid direct to the surveyor. Please note, in some cases, a maximum of £350 may be required to lock in the investor’s funds. This is refunded if we do not complete the bridging loan based on the information that was provided.

As a rule of thumb a valuation costs £110 per £100,000 of the value of the property.

Costs added to the loan

All other fees such as arrangement fees or legal costs are deducted from your loan (or added depending on your preference) when you receive your money. These fees typically include:

  • An arrangement fee of 2%.
  • Interest from 0.75% per month to 1.5% per month. The interest rate is fixed and does not compound.

Do you charge an early redemption or exit fee?

It depends on the deal and the safety of the planned exit route. If there is an exit or early redemption charge, the maximum it would be is one month’s interest payment. The minimum is zero.

how can I pay interest?

You can opt to service the interest monthly or you can pay the interest back at the end of the loan.

The interest rate is a fixed figure displayed monthly. The interest does not compound. The interest does not fluctuate and it is not variable.

how long will it take?

Bridging finance is quick. The speed really depends on the speed of your solicitors. The time scale it takes to complete is often between 5-18 days. This depends on a few factors beyond our control such as 2nd charge consent if applicable and the availability of local surveyors and your solicitors. Should you require, we can place you with one of our panelled solicitors to speed up the process.

What if my case is urgent? Do you offer a fast track service?

If your case is urgent and you need a quick completion, please advise your broker or case handler as to the deadline date and the reason why, we will then be able to offer a fast track service.

who instructs the valuation?

It is highly recommended for speed and safety that the valuer is instructed by BridgeCrowd. A borrower will get a better deal this way as the valuer provides an indemnity insurance to the investors.

However if a report has already been compiled then we may accept it provided that we are happy with the surveyor and it can be re-typed and the indemnity is attached.

what valuation figure do you work off?

On most deals we look at the Open Market Value of a property as valued by a registered RICS surveyor from our panel. The 90-day value is taken into consideration, but this is not what is used in our LTV calculations.

If an asset is being purchased below the Market Value, most investors take a view that the value of the property is the agreed purchase price. There are exceptions to this rule and 100% of the purchase price will be obtained where additional security or comfort charges can be arranged.

what security will you lend against?

We will lend against all types of UK property including:

  • Residential property
  • Residential developments
  • Commercial property
  • Commercial developments
  • Mixed use property schemes
  • Offices
  • Retail
  • Land, farms and agricultural
  • Investment property – residential and commercial
  • Auction

what’s the maximum loan to value?

There is no hard and fast rule as each deal is assessed on its merits. However, as a guide:

The max Gross loan to value on a 1st charge is circa 70% (and 80% on special circumstances).

The max Gross loan to value on a 2nd charge is circa 68% (and 70% on special circumstances).

We can even offer 100% of the value where additional security or equitable (comfort) charges are offered.

do you lend to people with adverse credit?

Yes.

Often people seek a bridging loan as they have gone over term on their financial commitments and as a result have adverse credit. A bridging loan can be a good tool to help alleviate the financial pressure and allow clients the time and flexibility to return to a stable footing again and improve their credit.

what if I have no income or cannot evidence the income? 

This is acceptable as you do not have to service the interest or loan monthly - you can pay it all back at the end of the loan. The important point with a bridging loan is your ability to repay the loan at the end of the period.

Acceptable repayment methods are: 

  1. Sale of the security or another property
  2. Pension
  3. Funds due from a business
  4. Funds due from a divorce
  5. Refinance onto a high street mortgage, a BTL mortgage or a commercial mortgage
  6. Investments
  7. Sale of other assets

what can I use the money for?

You can use the loan for any purpose. The most common bridging loans are for:

Tight transaction deadlines

Often banks and high street lenders can-not facilitate a short term loan quickly enough whereby it takes several weeks, often months to underwrite.

Banks will not lend

More and more banks have an inability to lend on non-standard mortgage deals. As such, a bridging loan offers a quick, realistic process with decisions made by real investors.

Business cash flow

This takes many forms and is very common. Whether it is to fund a short term cash flow requirements or to purchase a new business or even to start a new one up then a bridging loan is often the quickest and most realistic prospect of raising the funds. With this loan the applicant will need to demonstrate that they can repay the loan either i) through the business or ii) through sale of the security or iii) another realistic repayment model.

Paying tax liabilities quickly or divorce settlements

We provide bridging loans to pay tax bills or to help in a divorce settlement.

Renovation or refurbishment of a residential, commercial or buy to let property

We are finding more and more that banks will not lend on properties that are in need of refurbishment or redevelopment. In this instance a bridging loan is the perfect tool to help finish the property.

Auction purchase – pre-approval required and fast completion

Often clients require pre-approval for a property that they wish to bid on at auction and need to complete within 14 days after successfully purchasing the property. In this instance, a bridging loan is the perfect tool to help facilitate the purchase. Often the exit strategy is to pay the money back via a traditional mortgage.

Chain break finance

A classic bridging loan need – where a client has an offer on their property but wishes to purchase another (or put a deposit down) and funds are required quickly for a short period and repaid when the property transaction completes.

Conversions

Converting a property from a dwelling into flats or vice versa.

Landlords who are equity rich but cash poor / portfolio equity release

Many people, including landlords, have a lot of equity but cash may be tight. We will lend so that equity can be released from the properties in order to purchase new ones or pay off arrears and help the finances back on track.

Require a loan where interest is not serviced monthly

Interest on bridging loans can be serviced, rolled-up or retained. This means you can use the equity in a property to guarantee interest payments and these are paid on redemption.

Acquisition finance for business tenants to purchase their business premises from their landlord

Bridging loans for high net worth individuals

Large bridging loans for high net worth individuals for any purpose - subject to a realistic exit strategy.

Bridging loans for adverse credit applicants

Many people require a bridge because the banks and high street lenders have shut the doors firmly on anyone with adverse credit. A bridging loan is there to help get finances back on track, and in doing so, improve the credit scores.

Revolving credit facility (only on exceptional cases of low LTVs and high loan amounts)

We can offer a bridging loan secured against a main asset whereby the charge is registered and remains in duration and this allows you to draw down in stages as and when required.

100% purchase price with additional security

BridgeCrowd will advance 100% of the purchase price where there is additional security or comfort charges.

Development

Many developers require a fund to reach the next level of a development before additional finance or a sale can be arranged.

how long can I borrow the money for?

From 1 month to 2 years.

what happens if I want the finance, but don’t need it quite yet?

Just let us know. We recommend getting all your ducks in a row first. For example, it would be wise to get the valuation carried out and lock the investors’ funds in so that you can draw the loan down whenever you need it.

what if I struggle to pay the loan back at the end the term?

Firstly, don’t worry. We are social lenders and we will work with you. On 95% of loans we allow a loan extension should it be required provided that the property market is in the same condition.

If you repeatedly fail to repay the loan and, after an extension, you still show no signs of reasonably being able to repay the loan then your security could be at risk of re-possession. However, this measure will only be used as a last resort and we will work with you to find a suitable payment plan.

do you offer Regulated Bridging Loans?

BridgeCrowd is a trading name of Social Money Limited, authorised and regulated by the Financial Conduct Authority (Firm Reference Number: 675283) for credit broking, debt adjusting, debt administration, debt-collecting and debt-counselling activities and consumer buy to let loans. Social Money Limited is a company registered in England (reg no. 08054296). Social Money makes regulated and unregulated loans. The money that you borrow may or may not be regulated depending on the type of loan that you take. Please seek financial advice from your broker if you are unclear and before entering into any loan agreement.

what if the valuation is lower than anticipated?

Where the valuation is lower than expected, we will still offer the loan but we may reduce the amount accordingly within our guideline LTVs.

do I need my own solicitors?

Yes. If you do not have your own solicitors we can recommend one from our panel of solicitors who are expert at bridging and make the process quick and simple for you.

Can you recommend a solicitor?

Yes. We would recommend using one of our panel solicitors who are used to completing bridging loans so that the process is completed quickly. If you have a good relationship with your solicitor and wish to use them, then that is equally fine. The firm must have at least three partners and each individual applicant will need to seek separate legal advice from a different solicitor (it can be the different partners within the same firm).

what is an exit strategy?

An exit strategy is your plan on how you wish to repay the loan. Each loan will require at least one exit strategy.

Exit strategies vary. The most common repayment methods are:

  • Via the sale of the security or another property
  • Via remortgaging of a property or refinance of a development
  • Out of business proceeds
  • Tax rebate / sale of shares / pension matures
  • Awaiting a property to sell

what is the risk?

Any land or property offered as security may be at risk and may be repossessed if you fail to maintain your financial commitments.

LENDER FAQ’s and RISKS

What is our aim?

BridgeCrowd is a growing group of like-minded people and businesses whose aim is to improve their finances through borrowing and lending.

what is a bridging loan?

A bridging loan is typically used to cover shortfalls in funding or finances and it is “secured” against a property. Basically, like a short-term mortgage.

who is a typical borrower? what do we lend against?

The type of borrowers that apply vary and range from property developers looking to renovate, refurbish, develop or buy new properties to business owners looking to improve their business. The one commonality in all of our loans is that the borrowers own a property that we feel comfortable to hold as security until our loan is repaid.

We lend against UK property and land. The majority of our deals are over UK residential properties. We will consider securing over the semi-commercial and commercial securities if the loan to value fits our criteria. Our maximum loan to value is 70% (80% in special circumstances).

security?

We take a 1st or 2nd mortgage or secured loan over UK property. All of the properties are valued by a RICS approved surveyor who have indemnity policies that cover us for a negligent or mis-valuation. Our maximum loan to value is 70%. You choose the deals to fund. The mortgage security is held on trust for you until you are repaid from the sale or refinance of the property.

how do we make money?

BridgeCrowd makes its profit from the spread in interest rate that is charged to borrowers and the rate that it pays to you. For example, a borrower may pay interest at 1.15% per month, of which you may receive 1% per month and BridgeCrowd receives 0.15% per month.
*This is based on our standard “loan spread”.

do you have a secondary market?

Yes, and it is quite active. Please note that whilst the Secondary Market is at present very active, with average sales taking under 24 hours, your ability to sell your loan on the secondary market is subject to other lenders willingness to fund it. Loans that are over term can not be listed on the BridgeCrowd Secondary Market.

underwriting, fraud, valuations...

Risk, underwriting and fraud

The team

The team members have been lending and processing bridging loans for 15+ years and have a combined experience of over 50 years. Our backgrounds range from accountancy, insolvency practice, legal profession (barristers and solicitors) and loan underwriting. Our experience in bridging has taught us what deals to enter into and what deals to turn down. Importantly we know the loan to value criteria for different styles of properties as well as when to allow a loan extension and when to re-possess. We have developed extensive due diligence processes and procedures as well as excellent fraud prevention systems. Notably, we have processed thousands of loans and millions of pounds, and have never lost any capital. meet the team

Valuations and Loan To Value

We always obtain an independent property valuation from one of our paneled or approved RICS surveyors that have passed our due diligence and compliance procedures. We check their experience and the level of their indemnity cover to insure against any negligence or undervalued properties. The valuer will physically visit and inspect the property and provide us with a comprehensive report and photos of the property that we are lending against. This will include details on the local market and evidence of comparable recent sales for the property as well as any other specific requirements that are of importance.

Indemnity

The surveyors also provide an indemnity insurance policy against a negligent valuation. This provides a secondary layer of security. Should the valuation be negligent and should we suffer loss as result of their negligent valuation, then we will pursue the surveyor’s insurance indemnity policy for any economic loss after it has been mitigated.

Solicitors

Our solicitors process over £45million of loans and repayments each month for some of the UK’s largest bridging lenders. Suffice to say, they are collectively regarded as one of the specialist legal teams in the industry for both due diligence and recovery.

Our solicitors undertake additional due diligence on every borrower as well as the property security, title deeds, local searches and borrower's solicitor. Our solicitors draft the loan agreements that have been refined using years of experience as well as registering the legal charge over the security (unless the clients solicitor is registering the charge).

We perform extensive due diligence on the borrower's solicitor, ensuring that they have appropriate indemnity cover and at least three Solicitors Regulation Authority (SRA) approved partners. Every borrower is required to have independent legal advice. Their solicitor must speak to the borrower and explain the loan agreement and the consequences of not repaying the loan. This is done so that the borrower can not state they were unaware of what they were entering into and unsure of the potential consequences if they do not repay the loan. The solicitor also witnesses their signature of the loan and mortgage to ensure that the right borrower signs the contracts.

Borrower’s due diligence

We undertake an extensive variety of far reaching searches on the borrower (and the borrower's solicitor) to ensure that all parties and the statements of the borrower are backed up with evidence. We search credit reference agencies and undertake insolvency searches, courts searches, bankruptcy searches, and PEP sanctions. Additionally, our fraud prevention technology plugs into major credit agencies, and we ensure that every borrower provides identification and documentation that is authenticated to a high a level of security.

Hedge your risk

You have access to multiple loans and as such, you can spread your risk over multiple deals with varying repayment deadlines and interest rates.

what return can I expect and how long are the loans?

This depends on the loan to value (LTV) and type of security. As a guide the following are the current returns paid to investors.

LTV
Under 50%
LTV
50% - 70%
1st charge loans 0.6% per month 0.8% per month
2nd charge loans 0.8% per month 1% per month

what is the risk?

Whilst the loans that the BridgeCrowd make are secured over property, your capital is at risk and you may lose some or all of your money. Your loans are not covered by the Financial Services Compensation Scheme. If the borrower fails to make payments, you may not receive your interest and your capital is at risk and repayments are not guaranteed. You may lose some or all of your money. Past performance is not a reliable indicator of future performance.

There are risks with bridging lending. Below is a list of some of what we believe are the main risks of this type of lending of which you can could lose some or all of your money. This list of risks is not exhaustive.

Risk: The Borrower does not repay the loan

Mitigation: We assess the ability of each Borrower to repay the loan via their “repayment strategy”. The most common repayment strategies are “re-finance” or “sale of the security”. We analyse all exit plans. If the borrower does not repay the loan, we have the ability to repossess the security and sell it in order to recover loan.

Risk: The Borrower does not pay the monthly interest

Mitigation: If the borrower stops paying monthly interest, then you may not receive your monthly interst payment on time. However, you are still owed that money and we can repossess the Security to in order to collect it.

Risk: The market/valuation of the Property may fall.

This means that if the borrower does not repay and we are forced to repossess and sell the property, the property may not be worth as much as the initial valuation or it may be in negative equity and you may not receive all your capital or interest back.

Mitigation: We build in a cushion between the loan amount and the valuation of the property. We look at the value of the relevant property and set the Loan at a level which does not exceed a certain percentage of this value e.g 70% loan to value on certain residential properties. This provides a cushion for a potential down fall in the valuation or property market. Each LTV % varies depending on the asset type and location.

Risk: The Valuation report was negligent or fraudulent

This means that if the borrower does not repay and we are forced to repossess and sell the property, the property may not be worth as much as the initial valuation and you may not receive all your capital or interest back.

Mitigation: We build in a cushion between the loan amount and the valuation of the property. We look at the value of the relevant property and set the Loan at a level which does not exceed a certain percentage of this value e.g 70% loan to value. This provides a cushion for a potential down fall in the valuation. Each LTV % varies depending on the asset type and location. In addition, where a valuation is negligent, and that negligence caused loss, then we can make a claim against the Surveyors valuation policy to recover any capital or interest loss. In order to mitigate valuer fraud, we only use Surveyors that use Royal Institute of Chartered Surveyors (RICS), and that are local to area and, as much as possible, on our valuation panel. *For more information see our Global Lender Provisions.

Risk: A borrower makes it difficult to repossess or sell the property

This means that it may take longer to return to your capital and interest.

Mitigation: We have extensive knowledge of recovering funds and repossessing properties. To date, we have never failed to take possession of a property. The life cycle of a repossession may take a minimum of 3 months, but sometimes on rare occasions, it can take up to 2 years. *For more information on recovery time see our statistics page.

Risk: A Borrower, provide false and/or, misleading information or commits fraud.

Mitigation: We independently verify as much of the information as possible via 3rd parties. For example; if the Borrower states their property is worth £300,000, we would always instruct an independent RICS surveyor, often from our panel, to value the property. If the borrower states that they have a mortgage of £150,000 over the property, we would contact the mortgage company to confirm the level of the mortgage and its current status. The list and checks that we make on each deal are extensive and can not be written here for commercial sensitivities. Please remember that our ultimate safety net is the Security. Therefore, in reality if the borrower commits mortgage fraud, we still have the Security to fall back on to recover the loan capital and or interest.

Risk: A borrower is not who he says he is or commits identity fraud.

Mitigation: We have extensive anti-fraud measures that minimise and reduce the risk of identity fraud. These range from technological checks to ensure that money is paid is to the bank account of the named borrower. We also only send funds to the borrower’s solicitor who undertake to pay the money to the titled borrower. This is so that if the solicitor of the borrower has been duped by identity fraud, then should be liable to us for not paying it to the correct borrower.

Risk: A borrower states that they did not make the loan, or the loan was made under duress or they did not understand the loan

Mitigation: The borrower must receive independent legal advice and their solicitor makes a legal undertaking to us that they have made these checks. The solicitor must speak to the borrower and explain the loan agreement and the consequences of not repaying the loan. This is done so that the borrower can not state they were unaware of what they were entering into and unsure of the potential consequences if they do not repay the loan. The solicitor also witnesses their signature of the loan and mortgage to ensure that the right borrower signs the contracts.

Risk: A borrower contests the validity or regulatory nature of the loan

Mitigation: We seek to ensure that the loans are validity enforced via the respective solicitors and both our solicitors and our underwriting team we have extensive knowledge of the regulatory nature of the lending.

Risk: A solicitors or other advisors of the borrower provide false and/or, misleading information or commits fraud.

Mitigation: A solicitors or other advisors of the borrower provide false and/or, misleading information or commits fraud.

Risk: It is not possible to register the Legal Mortgage at the Land Registry or a solicitor fails in its undertaking to do so or there is a problem with the title to the Property;

Mitigation: Our solicitors make extensive checks on the Title of the Security. For more information see “Underwriting, Fraud and Valuations”. We perform extensive due diligence on the borrower's solicitor, ensuring that they have appropriate indemnity cover and at least three SRA registered partners. If the solicitors provided negligent or misleading information and this caused loss, then we have recourse to the Solicitors indemnity policy.

Risk: Banking fraud or Internal Theft in respect of the client trust account or any cyber-fraud.

Mitigation: We have professional negligence cover the extends to cyber fraud/theft and employee fraud theft.This is subject to the insurance policy TnC’s.

Risk: A PI insurance policy does not pay out or does not extend to the full loss.

Mitigation: We review our processes, procedures and policies regularly. To date we have not had to make a single claim against any our insurance policy nor those of a 3rd party. Past performance is not a reliable indicator of future performance.

Risk: The BridgeCrowd or Social Money become insolvent

Mitigation: BridgeCrowd holds the securities over loans to all borrowers in a trust on behalf of you. Should BridgeCrowd stop trading or become insolvent, then these security interests are ring fenced from the BridgeCrowd insolvency. The liquidator or administrator would be obliged to recognise the trust arrangements and use the property in trust to return capital and interest to the relevant Lenders (and not apply these assets towards BridgeCrowd’s creditors generally).

Risk: Any unforeseen circumstance which may affect the Security (e.g fire or water damage) the Borrower (e.g death or bankruptcy), the Property

Mitigation: We ensure that all our Securities have a valid fire / damage insurance policy. Should the borrower go bankrupt or pass away, then we can still seek to recover the loan capital and interest from the the security.

Risk: Platform failure or technological failure

Mitigation: We make daily back ups of the platform, the site, the loan book and your accounts. This is so that if there was a technological failure, we would be able to re-install the site from the last back up.

Risk: 2nd charge loans

Mitigation: A 2nd charge lender has the same the legal rights as the 1st charge lender and can repossess the Security if the loan is in default. Provided that 1st charge lenders gets paid back first then there is not a lot that they can do to stop that process. Ergo, the only significant difference is that a 1st charge lender would get paid their loan back first. We make extensive checks as to the monetary position of the 1st charge loan, and where practicable we gain the 1st charge lenders consent a deed of postponement so that the first charge lender can not increase their loan amount. We also ensure that Loans are sized in consideration of any prior loans to first in with our Loan To Value cushion. There are many other steps that we check to lend safer via 2nd charge loans. However, due to commercial sensitivities we are not willing to publish our “know-how” online. If you would like more information, please contact us.

The above RISKS are not exhaustive. There could be other risks not stated above or that are unforeseen and beyond our control. Even though we have not lost any capital nor any interest in any of our loans (as of 01/05/19), please remember that by lending, your capital and interest is at risk of loss and it is not guaranteed. Past performance is not an indicator of future performance.

are there any fees?

No, we do not charge lenders any fees for membership or for repaying funds.

what happens if the Borrower defaults under his loan?

The default process varies on each individual loan that we make. Sometimes we may extend the loan and on other occasions we may appoint receivers to re-possess the property and sell it in a timely manner. We always build into our loans the ability for the borrower to extend the term by a further reasonable period. This is especially important in cases where the borrower is selling the property and it is on the market or the borrower is arranging a refinance and we feel that the borrower is likely to achieve this goal within a reasonable time frame. Should the property be on the market for some time and it has not had any firm offers we may ask the borrower to reduce the asking price. Where the borrower refuses to cooperate, we would then consider appointing receivers. The decision of how to manage the loan and whether to allow an extension or appoint receivers rests with BridgeCrowd. We may ask affected investors for their views, but the final decision always rests with us.

what happens if we were to stop trading or become insolvent?

Social Money holds the securities over loans to all borrowers in a trust on behalf of you. Should BridgeCrowd stop trading or become insolvent, then these security interests are ring fenced from the BridgeCrowd insolvency. The liquidator or administrator would be obliged to recognise the trust arrangements and use the property in trust to return capital and interest to the relevant Lenders (and not apply these assets towards BridgeCrowd’s creditors generally).

Are you regulated by the FCA? Are my funds protected under the FSCS?

BridgeCrowd is a trading name of Social Money Limited, a company which is authorised and regulated by the Financial Conduct Authority (Firm Reference Number: 675283) for credit broking, debt adjusting, debt administration, debt-collecting and debt-counselling activities and consumer buy to let loans. Social Money makes regulated and unregulated loans. However, as a lender, the loans that you make are not regulated by the FCA.
Your loans are not covered by the Financial Services Compensation Scheme.

how does the referrals scheme work?

The referrals and cash-back scheme is where you are referred from one of our partner companies or where you refer friends, clients or colleagues. You will receive a £250 cash-back reward for every referral made. The referral cash back can only be given when the referred investor has invested £5,000 or more into a new loan within 45 days of signing up. This offer is not valid for the secondary markets and for members of your immediate family or the same household.