Commercial bridging is now a realistic solution, says Greenfield Capital

Commercial bridging is now a realistic solution, says Greenfield Capital




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Commercial property transactions remain a rich source of profitable deals for those that can source the relevant funding. Though at times this can be difficult to find, commercial bridging finance can allow deals to go through that normally would not. B&C spoke to Charlotte Rayson, Relationship Manager at Greenfield Capital Ltd, to find out how to get around the pitfalls of commercial finance…

With turbulence in the commercial property sector, there are plenty of opportunities for clients to make a great property acquisition. Unfortunately, however, access to funding for commercial property has become scarcer. 

We have seen traditional sources - like the mainstream banks - limiting their funds or withdrawing them altogether. Additionally, when banks do approve commercial mortgages, it can be a long wait for the funds to drawn down, often resulting in three to four months wait. 

This is where bridging can be a great asset, as one of its main benefits is speed. A commercial bridge can be completed and drawn down within five to ten days, whereas a bank is unlikely to have even achieved a credit approval within this time frame. Indeed, it's not good to hurry a bank as it's likely that their credit proposal may be rushed and incomplete as a result; this can delay the credit decision further or provoke an early decline from the bank.  

Often banks will attempt to rewrite existing facilities as part of a larger funding package. This is usually down to a commercial decision, where the existing margin was agreed before the economic down turn, at attractive rates from as low as 1 per cent over base. Repricing is merely a means to achieve future profitability for the bank. Unfortunately, it's the client who is compromised with conforming to today's margins, which can reach 5 per cent over base rate. 

It's also likely that the former facility had a capital holiday, whereas current facilities tend to have aggressive amortisation with higher capital repayments too. A commercial bridge, therefore, is now a realistic short term funding solution.

We regularly see clients capturing property opportunities where they have purchased at auction or from receivers. They will benefit from a forced sale purchase price, but will need to complete any deal within a limited time frame. A commercial bridge is, again, the ideal solution. 

There is also a potential issue to consider when a commercial bank will not lend at all due to a need to prove income. Lenders can often assist by injecting money into a project to complete a refurbishment, before waiting for the client to let out the property to tenants and prove serviceability in order to obtain a commercial mortgage. 

Below shows a summary of reasons why many clients are using Greenfield Capital's commercial bridging: 

Bridging to purchase equipment or to fulfil a large order;

Business expansion where potential turnover cannot be proven;

To support a purchase where a speed is necessary to secure a discounted price;

Banks’ withdrawal of funding on existing commercial mortgages.

 

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