Warren Buffett is often described as a thoroughbred “money man”. In nearly 60 years he has made billions of dollars of profit from his investments.
Yet even with all of this tremendous wealth and experience in making money on his investment projects, Warren Buffett is still extremely cautious when it comes to playing poker. In fact, his approach to the game 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!”
(By the way, according to the Collins Dictionary a “patsy” is described as being someone that is easily cheated or victimised.)
If an experienced individual like Warren Buffett recognises that he does not hold all the cards, regardless of his past investment successes, then what should that tell a borrower about the strength of their position when they are seeking a bridging loan?
In the decade when credit flowed freely (i.e. 1997 to 2007), it was borrowers who appeared to hold the cards. Real estate projects were plentiful. Financiers were all queueing up to get a piece of the action at virtually any price. The capital markets were constantly on the lookout for projects to fund and this filtered through to all levels in the economy, including bridging loans.
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.
However, the financial markets have doled out a fundamental lesson to us all, lenders and borrowers alike, which is this:
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.
However, the problem occurs when the borrower thinks he is the one in the position of strength and he fails to show or prove any of this. But, once again, is it the Lender’s money or the Borrower’s?
As daft as that question may seem, many borrowers need to realise that it is the lender that holds the strongest hand at the moment and, dare we say it, the borrower is closest to being the “patsy”. (Not literally of course but hopefully you get our drift.) The tables may well turn in future but for now that is the way it is.
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 finance can help you exploit business opportunities quickly. Contact Bridging Loan Direct to learn how you can use bridging loans for maximum profit
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