AR Factor Quote

It’s fair to say that Warren Buffett can be described as a thoroughbred “money man”. He has made billions of dollars in profits from his investments for close to 60 years.

However, despite all this profit and vast experience in making money, Warren Buffet is as cautious as the next man when involved in the game of poker because when he plays, his mantra goes something like this:

“If you’ve been playing poker for 30 minutes and you still don’t know who the patsy is, then it’s you!”

(The dictionary definition of a “patsy” is someone that is easily cheated or victimised.)

Therefore, when someone of the calibre and with the expertise of Warren buffet accepts that in some circumstances he does not hold all the cards, regardless of his past successes in the business, then what does that tell a borrower about his position of strength when searching for a suitable bridging loan?

During the period when credit was easy to obtain (i.e. 1997 to 2007) it was the borrower who had the upper hand. Property investments were abundant. Financiers were eager to get a piece of the pie at whatever price. The capital markets were forever seeking suitable projects to invest in and eventually this went to every level in the economy, which meant bridging loans as well.

During this time if someone had even a modicum of experience, they could secure a bridging loan very simply indeed. Actually, bridging loans, mortgages, secured loans … almost all types of finance were available without any trouble. A borrower could, in effect, take a very short walk to a lender, say their name and if this carried any recognition whatsoever, they would get money. Just like that; as if by magic.

The financial markets have taught us all a valuable lesson, borrowers and lenders alike:

Money is not meant to be “easy-peasy-lemon-squeezy” to come by.

Excuse the apparent flippancy of the above remark but after years of conditioning, that is precisely how borrowers have come to see bridging loans and other forms of finance.The onus should be on the borrower to show that they genuinely believe in their project; that it is viable; that the returns will materialise and that a decent profit will be made. The borrower also needs to show that they are prepared to assume a reasonable level of the risk in partnership with the lender.

None of this can happen if the borrower believes he has the strongest hand. Just exactly whose money is it – the lender’s or the borrower’s?

Borrowers need to wise up and realise that it is the lenders who hold the strongest hand (at the moment), and it is the borrower who is the “patsy”., figuratively speaking. This is the situation as it currently stands and will likely remain so for the foreseeable future.

So whatever type of finance you require, be it a bridging loan or similar, in the current market the borrower should be aware that it is the lender with the trump cards. Give them what they are looking for and you, as the borrower, may get the bridging loan that you are looking for.

Bridging loan finance is an essential tool in a property trader’s business. Speak to a specialist now in bridging loans to help you scale up your own property trading business