Notes from the lending desk.

Bridging

What to ask a bridging lender before you sign

The questions that matter are rarely about the headline rate. Ask how interest is treated. With us retained interest is the standard structure: it is deducted from the loan on drawdown, so there is no monthly payment, but less cash arrives on day one. Serviced interest, paid monthly in arrears on the first business day of each month by direct debit, is available by agreement. Either way, loan to value is measured on the gross loan, and unused retained interest is refunded on early redemption, subject to the make-whole period.

Ask what the make-whole period is. Ours is six months as standard, and twelve months where the term exceeds twelve months. Repay earlier and interest to the end of that period falls due on redemption. There is no exit fee unless one is agreed at the outset and written into the terms.

Ask who pays for what. All costs of the facility are for the borrower, including our legal fees and the borrower's own, the valuation, searches, title insurance and any monitoring surveyor, whether or not the facility completes. Our solicitors and the valuer each give an estimate before instruction and those amounts are put on account first. A lender that is vague here at the outset will not become clearer later.

Finally, ask what the lender takes as security and what happens if the exit slips. We take a first legal charge over the property, a debenture from the borrower including a first ranking floating charge, and personal or corporate guarantees, supported where the asset sits in a structure by a charge over the entire issued share capital of the company that holds it. Ask about the default rate too. Ours is 2.00% per calendar month. Terms run for six months as standard and can extend to 24.

Development exit

Development exit finance, and why the sales programme needs room

A development facility is priced and structured for a build. Once practical completion is reached the risk has changed: there is a finished asset and a sales programme, not a programme of works. Keeping the development facility in place beyond that point usually costs more than it should and applies pressure to the sales at exactly the moment discounting is most expensive.

A development exit bridge replaces that facility. It is priced from 1 per cent per calendar month with a 2 per cent arrangement fee, on a term of six months extendable to 24. The purpose is to buy time, not to buy leverage.

What speeds a case up is evidence of the exit. Agency advice on pricing and absorption, any reservations or exchanged contracts, and the certificate of practical completion. With a valuation, title and a written exit strategy, indicative terms follow within 24 hours and funds can be released in as little as five working days on a straightforward case.

These notes are general commentary for property professionals. They are not advice and they are not an offer of finance.