If a high street bank cannot assist one of their customers to obtain finance, the Bank Referral Scheme requires them to direct customers to an alternative finance provider.
Even if a bank has agreed to a loan, there can be delays in releasing the funds. In a recent case, a bank had agreed to a loan to purchase and redevelop property. Due to legal complications, the bank could not release the funds in time to complete the purchase. The bank then referred their customer to a bridging loan provider who provided a bridging loan for the project.
The Federation of Small Businesses is not sure about the efficiency of the Bank Referral Scheme and wants access to lending figures to research the scheme before they can decide about supporting the scheme.
A disadvantage of the Bank Referral Scheme is that the bank may have a restricted list of alternative lenders and may not necessarily refer their customers to the best possible lenders. If a borrower finds that they cannot complete a property deal quickly because of delays in the loan application process, they can use a bridging finance broker who has access to a wide range of lenders. A skilled broker can match the borrower’s requirements to the best bridging finance lender.
For developments where the developer wants to sell the property at a profit after refurbishment work, a bridging loan can be quickly arranged and repaid after the property is sold.