By Marc Goldberg, director at leading provider of second charge commercial bridging finance, Lancashire Mortgage Corporation
For the vast majority of small businesses, accessing funding has never been more difficult. The major banks have squeezed their lending criteria to such an extent that even those businesses that do secure funding will have to endure a long, complex and drawn-out process to get the money they need.
The situation is compounded by the fact that many SMEs now need good lenders more than ever. Those that are struggling often need an immediate burst of funding to maintain the necessary level of cashflow; those that see opportunities need to take advantage of them quickly as the recovery sets in.
It is likely that businesses have their first charge with a high street bank, making the access to extra funding difficult in the current climate as the banks generally don’t offer further advances on their long term business loans. Remortgaging with your existing lender is likely to be ruled out, as they are unlikely to be able to match the product rate already in place. In the unlikely event that a bank was willing to do the deal at the same or better rate, remortgaging with a new lender could be a lengthy process.
It is for these reasons that second charge commercial bridging finance is so important in today’s funding arsenal. It allows companies to secure bridgingloans against land or property, enabling them to take up opportunities where large sums of money need to be raised over a short period of time.
There are a number of situations in which bridging finance can be invaluable to SMEs. For example, it can give clients important breathing space when acquiring a site pending planning or development. Similarly, it is ideal for development finance, as funds can be drawn down at various stages during the project. Bridging finance also lends itself well to MBOs and MBIs, as there is frequently a short time frame in which to complete the transaction.
SMEs often choose to take on a second charge loan because it provides them with the security they require to take those next steps towards expansion and the realisation of business goals and ambitions.
Second Charge Bridging Finance has many purposes and its versatility can help a business take advantage of short term opportunities. Examples include:
- Capital raising – to grow the business and develop into new markets
- Property development – to acquire additions to a property portfolio
- Buying stock – where the price of stock is reduced if it can be bought quickly.
For small businesses where short-term cashflow is needed, it makes sense to consider bridging finance, particularly where other avenues of funding have been exhausted. A second charge bridging loan can be taken out even when existing debt facilities are still in place, often providing a lifeline for struggling companies or a vital boost to those who want to seize opportunities before they disappear. As such, it should play an important part in all brokers offerings, to give clients the flexibility and support they need in what remains a difficult trading climate.”
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