Managing Risk

Responsible Lending

At Funding Tribe, we strive to provide the best possible service. We are a responsible lender and we take risk mitigation, due diligence and underwriting very seriously. Before entering into a credit agreement with a customer, a lender must make a reasonable assessment of the customer’s creditworthiness and how affordable and sustainable the credit is – the risk to both the lender (credit risk) and customer (affordability risk). This assessment must include considering the customer’s financial wellbeing – that is, the potential for the commitments under the credit agreement to have an adverse impact on the customer’s financial situation.The assessment is intended to determine the customer’s ability to make repayments as they fall due over the life of the credit agreement. It must be based on sufficient information, which may be obtained from the customer, where appropriate, and from a credit reference agency, to establish the customer’s credit history.

Property Related Risks

Property investment is one of the four most popular types of investment together with cash, bonds and shares. None is without risk.

Like all other markets, the property market has its cyclical highs and lows. Demand for property and its value can rise and fall. The value of any property development project and the associated security asset can change accordingly.

If the predicted value of a completed project falls and/or the value of the associated security asset falls, the borrower may find it difficult to meet their repayment obligations, particularly if they try to refinance their loan based on a reduced valuation.

To mitigate property value related risks we have the following protections in place:

  • All loans are secured with a legal charge (mortgage), which means the property can be sold if the loan needs to be recovered.
  • Loans do not exceed a maximum of 70% of the open market value. This means that if the borrower cannot repay the loan This means that if the borrower cannot repay the loan as planned, it is highly likely we will be able to recoup all funds from the sale of the secured property.
  • For all loans, we obtain a professional valuation, undertaken by RICS registered valuers with local experience. These are backed by professional indemnity insurance. Each valuation is carefully inspected by our experienced underwriting team to ensure the security is acceptable to support borrowing proposal.
  • All legal reviews are only ever undertaken by recognised and established law firms.
Borrower Related Risks

We treat credit risk and financial fraud with paramount importance. It is at the heart of the way we operate. This is because payments are contingent on the borrower’s successful exit from the underlying property project.

In the property sector, extensions and further advances are often agreed. The bridging loan market could not operate if every loan – in which repayment was compromised – was forced into recovery action.

A bridging loan is a commercial agreement that is not comparable to, for example, a residential mortgage. A greater degree of tolerance is typical in the bridging loan market, as it allows a degree of flexibility for the lender to resolve common situations that are beyond the control of the borrower, such as delays in planning permission.

Before committing to a project, we examine the viability of the borrower’s payment schedule. This includes the intended exit plan, typically by refinancing or selling the underlying property as a whole or in tranches.

If a loan extension is requested, we thoroughly review the borrower’s track record and the project’s progress to ensure continued suitability before approving an extended term. In these circumstances the borrower would pay additional interest for this period and an additional fee.

Finance Related Risks

Those seeking short term property finance in the UK are typically working to tight deadlines that require fast turnaround finance. The profile of these borrowers can be very diverse too, ranging from individuals to complex corporate structures.

These factors can make short-term property finance a target for criminals to attempt to launder money or commit other financial crimes.

Our experienced underwriting team undertakes comprehensive checks on every proposed borrower:

  • All borrowers are subject to a stringent due diligence check.
  • We conduct additional checks to limit credit risk.
  • We only accept a project when we are confident that the borrower will meet their repayment obligations.