Most of our competitors have formal extension fees in place and as standard, will charge around between 2% and 5% on loan extensions, right from day one on any extension offered. These tend to be the lenders who have won the business through a market leading rate, but as the customer now finds out, are now clawing that money back through extension fees, even if the borrowers’ project has been delayed through no fault of their own and for a reason they have little or no control over. These default fees can rack up very quickly, and if the borrowers’ budget had not allowed for expensive fees over an extended period of time, could potentially put the borrower in financial difficulty.
We don’t work like that. We look at each case individually and have no standard extension fees policy.
We often work with clients to re-bridge a bridge and take the debt away from the current lender. By doing it this way, we can offer the ‘extension’ i.e. the new bridging loan, with an arrangement fee of 2%. Not only is this cheaper than the potential of 5% charged by some of our competitors – which is normally only for a 3 month extension – but it also gives the client a longer-term enabling them to get their exit strategy in place.
There are not many lenders that could or would do that. Most will take computer says no’ standpoint; if they had a bridge once and defaulted, why would we bridge them again?
But not us. We look at why the original bridging loan was not repaid in time, and if the client has a firm exit plan in place, we are happy to take it on.