Modern finance is evolving quickly, and there are many different options available to investors and borrowers alike. One of the most exciting developments of the 21st century has been the huge strides made in digital connectivity, which enable fast-paced lending and borrowing to take place between individuals. This financial technology (or “FinTech”, for short) has changed the ways in which money is handled, and has diversified the market enormously. Firms like Kuflink Group are at the forefront of this digital innovation, and are bringing enormous opportunities to everyday investors.
Who are Kuflink?
Kuflink Group consists of two separate entities; Kuflink Bridging Ltd, and Kuflink Ltd. These two businesses work to complement each other’s activities and provide greater options for investors, but provide very different services. Kuflink Bridging Ltd is a financial firm offering bridging loans for investment properties, supplying private individuals and businesses with the funding they need to carry out real estate investment projects. Kuflink Ltd, the lender’s sister company, is a digital peer to peer lending platform which allows individuals to invest in specific loans as they choose.
Until recently, Kuflink were known as Alpha Bridging, a fast-growing bridging loans company specialising in bespoke loans of under £250,000. In May 2016, they announced that they would be expanding and rebranding as the Kuflink Group, adding their new peer-to-peer lending platform as a unique service. As a relative newcomer to the financial world, Alpha Bridging and Kuflink Group both draw on a wealth of insider knowledge and experience to deliver high quality secured loans and investment opportunities alike.
What is Bridging Finance?
Bridging finance is a fairly new type of lending which has been developed in the past fifty years. Since the 1960s, it has found favour amongst property developers as an excellent way of securing funds quickly, in order to take advantage of opportunities as they arise. This is incredibly useful, because property typically needs to be bought within a short time period in order to guarantee its use, but the large sums of money involved can make it prohibitively expensive to pay for this with capital. Unfortunately, most sources of long term finance (such as mortgages) take too long to arrange, and put developers between a rock and a hard place: either invest a great deal of capital into a deal, restricting the business’s flexibility, or risk losing the opportunity altogether.
This is when a fast and flexible source of finance is especially useful; using a short term loan to “bridge the gap” between one source of long term finance and the next allows businesses to secure investment opportunities without needing to commit a large portion of capital. This also drives competition within the industry, as it allows businesses with a smaller amount of capital on hand to bid against larger businesses. Without this ability, small developers would be unable to meet the requirements for investment in many real estate arenas, and would be squeezed out by larger players.
Bridging isn’t only a valuable option for developers, though, and many landlords use bridging finance to help them secure their ideal property without being tied to their own property. Kuflink Group provides finance for buy to let investors, which allows landlords to purchase properties to expand their portfolio having to work within the constraints of their cash flow.
The opportunities provided by bridging finance are many, and give investors a huge variety of choices when it comes to securing property. However, if bridging finance is improperly used, it can lead to severe problems. If loans are approved for borrowers who are unable to repay, the consequences for lenders and investors alike can be disastrous. Because bridging is such a powerful tool for expansion, it’s often in demand from businesses which are borrowing heavily to finance growth; this means that any bridging finance deal needs to be scrutinised minutely before approval. This is why lenders like Kuflink Group submit to the Financial Conduct Authority’s oversight, and have become members of multiple financial organisations; irresponsible trading damages the reputation of the whole industry, and leads to a lack of consumer confidence.
What is Peer-to-Peer Lending?
What makes Kuflink Group such an innovative lender is its integration of a peer to peer (commonly abbreviated as “P2P”) lending platform within its business model. In its simplest form, P2P lending provides an opportunity for loans to be funded not by a bank, but by individuals.
Many different P2P platforms exist, but they all operate on a simple concept; a loan of any size doesn’t need to be funded by one single lender, but can be funded by many smaller loans. In the pre-digital era there was a limit to how many investors any loan could reasonably have; could you imagine having thousands of lenders for each loan, when everything was conducted in person? However, with the advantages that modern FinTech provides, loans can be funded quickly and easily by any number of investors, which makes the process of lending and borrowing from an online P2P platform much easier.
An advantage which P2P lenders have is that they aren’t constrained by the Bank of England base rate in the same way that retail banks are. A traditional high street lender would be financed by loans from the Bank of England, which would have an interest rate attached to them; this dictates the rates at which they charge their own interest; they need to make a profit, so their interest rates correlate (at least, generally) with what the Bank of England is charging them. However, investors in P2P lending are supplying their own capital, not a loan; this means that they’re not paying interest on the funds they supply, so P2P loans are not tied to the base rate in the same way that traditional loans are.
Peer to peer lending isn’t completely independent from other consumer credit suppliers, though, and they still have to market their products in line with the rates set by other lenders in order to remain competitive. This means that P2P loans often provide a close alternative to high street lenders, but rarely a substantially different product.
What Does Kuflink Group Offer?
Kuflink Bridging Group is an intermediary, and not a lender in their own right. The service they provide is to arrange finance from appropriate lenders, ensuring that both parties secure a deal which is beneficial to them and provides them with everything they need.
Borrowers who wish to access finance through Kuflink Group must first assess whether they match the borrower criteria set out by Kuflink Bridging. This places some restrictions on the types of loans which can be offered, who they can be offered to and what they can be used to finance:
- Loan to Value
As mentioned previously, bridging finance should be used to enable expansion only where there is a reasonable expectation that the loan will be repaid. Therefore a loan cannot be taken out which consists of over 70% of the total value of the property; this is to help guard against over-borrowing businesses who leverage a small deposit into an inappropriate purchase. This is in line with many other mortgage providers, who will only approve investment mortgages when there is a substantial deposit in place.
- Loan Term
As a source of short term finance, bridging loans cannot have a repayment period of more than two years. Kuflink Group features a set of previous loans as examples on their website, all of which have a repayment period of less than 6 months; most bridging loans are made for substantially less than the maximum two years term.
- Loan Size
Regulating the size of each individual loan is important for any lender, so that they can maintain control of the products they’re investing in. Kuflink Bridging offers loans from £30,000 to £1,000,000 in value, which means that they’re able to provide finance not only to residential owners and landlords but for larger-scale developments and projects. This represents a significant increase in maximum loan size over Alpha Bridging’s (Kuflink’s previous brand name) ceiling of £250,000.
- Leasehold Length
Like many mortgage providers, Kuflink Group is unlikely to provide funding for properties which have a short lease term remaining. This is because when a property’s leasehold falls beneath 80 years it becomes much more expensive to renew, and the value of the property can suffer significantly as a result.
- First Time Buyers:
Kuflink Bridging loans are designed to offer investors an opportunity to expand an existing portfolio, or to leverage an existing asset. What they aren’t designed to do is buy a first house; a bridging loan is an inappropriate way to finance a first home, since there is no need to convert an existing asset into capital. Therefore, bridging loans are only available as a second charge on an existing mortgage – it can only be used if the borrower already has a mortgage. This means that a homeowner could use a bridging loan on their main property to create a deposit for a new home, a common way for buyers to “break the property chain” when moving house.
How it Works
So Kuflink Group offer bridging finance with a P2P lending twist – how exactly does that work? Well, it provides investors with the best of both worlds; not only can they invest as and when they want to, but they also have the added security of knowing that all borrowers have been vetted by Kuflink’s Independent Credit Committee to ensure that they meet the rigorous standards required.
Once the loan has been approved by Kuflink Group, they will provide 20% of the loan themselves. This is a unique example of a P2P lender putting their money where their mouth is; their investment is also the first to take the hit if the borrower should fail to repay, giving individual lenders the safety of knowing that unless things go catastrophically wrong their investment will be safe.
This unique system allows Kuflink to provide large loans without needing to secure high levels of funding from investment groups; a loan of £500,000 would only require £100,000 of investment, since the remaining £400,000 will be sourced from P2P lending. This ability to provide large loans quickly without requiring access to large investors allows Kuflink to be flexible, adaptable and resilient.
Unlike many other P2P platforms, lenders have the option to choose exactly which loans they choose to fund. This allows a greater degree of personal freedom and choice, which is often lost in the digital marketplace – of course, lenders can opt out of this if they prefer a more hands off approach, and place their funds into an “investment pool”. This is then used to finance various loans, with the collective funds of all the investors combined into one large sum.
Who does Kuflink Group help?
The beauty of bridging finance is in its flexibility. Because it can be used for so many different applications, it allows businesses and developers to acquire investments they otherwise would be unable to reach, and for private individuals to make purchases that would otherwise be unaffordable. The key identifier of Kuflink Group is that their loans are made for investment properties; this gives the group a defined identity and a specialisation. Because their loans are specifically designed for financing property developments, they create a set of characteristics which lenders and borrowers alike can rely on:
- Secured Loans
Kuflink Bridging loans are used to invest in equity, and not supplied as a flexible asset. This is an important distinction between Kuflink and many other bridging lenders, who will often provide finance for unsecured loans. Because Kuflink Group is a dedicated supplier of secured lending, they’re able to attract investment from groups which specialise in funding loans of this type, where a more generic lender might struggle to attract attention.
- Dynamic and fast moving
Kuflink Group’s commitment to maintaining an online presence goes beyond a digital trading platform, and determines how they conduct their business. In the world of finance speed is of the essence, so there’s no room for delay when making decisions. Short lines of communication are key, and customers need to be able to get answers quickly.
- Transparency and Responsibility:
Improving and maintaining the public perception of the financial industry is vital in the modern day, so Kuflink are committed to ensuring that all lenders and borrowers understand exactly what they’re getting when they sign up to an agreement. In addition to this, Kuflink Bridging investigates all borrowers fully to make sure that each deal is properly signed off before being made available to lenders. Even though a rejected application means less money for them, Kuflink Group understand that the implications of a bad deal go much further than a loss of money; a loss of reputation makes it much harder to do business in the future.
Who does Kuflink Group work with?
Kuflink Group is at the forefront of innovation in the financial industry, and as an up and coming financial broker is responsible for building the reputation of this vital sector. Establishing a strong track record as a reliable lender is important, and the entire short term lending community works to ensure that customers are not exposed to unscrupulous lenders. To this end, several industry bodies have been established which work to engender a sense of community within the short term lending industry; the “Association of Short Term Lenders” (ASTL), the “Association of Bridging Professionals” (AOBP) and the “National Association of Commercial Finance Brokers” (NACFB). Each of these organisations has their own membership and leadership group, though many firms will belong to all three organisations, as is the case with Kuflink Group.
Belonging to these organisations is important for Kuflink Group, as it brings them into contact with many other professionals in the financial field. Not only are they able to meet other bridging professionals, but they can also attend regular annual meetings and conferences. These events are invaluable, because they often feature several lectures from guests in important related fields; for example, speakers at the latest ASTL conference in 2016 included representatives of the Financial Conduct Authority, The Times newspaper and Savills real estate agents. Input from these industry experts is vital for financial businesses which rely on up to date information to determine the course of the industry in the future.
Kuflink Group in the coming years
Although Kuflink Group is still a relative newcomer to the world of bridging finance, the wealth of experience accumulated by its staff provides keen insight and expertise. This expertise and ability to adapt to changes in the market will give Kuflink Group the tools required to forge a path in the future. In addition to this, its investment in a diverse, responsive and resilient P2P platform allows Kuflink Group to take advantage of opportunities which many other businesses cannot, providing finance for a range of different customers without requiring large investment from outside lenders. This business model is fast and flexible, and Kuflink Group should find it rewarding in the future.
Official resources about Kuflink P2P can be be found here:
Official resources about UK regulatory bodies:
- National Association of Commercial Finance Brokers (NACFB)
- Association of Bridging Professionals (AOBP)
- The Association Of Short Term Lenders (THEASTL)
- The Financial Conduct Authority (FCA)
- Bank of England Website
- Prudential Regulation Authority
- Financial Conduct Authority
- The Financial Policy Committee
- Financial Services Compensation Scheme
Other Unofficial Bridging Finance Guides
Covering areas of UK financial regulation and aspects of Bridging Finance.
- Alpha Bridging
- Association of Bridging Professionals
- Central Bridging
- Commercial Banking
- National Association of Commercial Finance Brokers
- Reward Finanace Group
- Short Term Finance
- Taxi Finance
- The Association of Short Term Lenders
- The ASTL
- Watts Commercial
Bridging Guide by Bridging Directory