Bridging & Commercial | Bridging-tips-archive

Bridging Tips Archive

with Lancashire Mortgage Corporation

Tip 1: Bridging loans to get you started

Not all property is equal in the eyes of many lenders – we’re always seeing borrowers who are struggling to finance a renovation, complete a land purchase or take their first steps into a new property investment project.

Bridging loans tend to be a lot more flexible than a mortgage when it comes to both commercial and residential properties and projects. With so many people trying to get into buy-to-let, it can be a great choice if your clients are already landlords, or if you represent investors looking to build portfolios – and it’s one of the few options left for people looking to buy dilapidated properties for full renovation.

We believe that brokers could be adding a real string to their bow by offering bridging loans as part of their lending portfolio – after all, they could give you access to a whole range of new customers!

Tip 2: Self made?

We all admire those who’ve made it on their own. Your clients may be their own boss, but finding funding to seize a short term business or property opportunity can often be difficult.

Many high street lenders have tightened criteria and procedures in recent years, meaning that for certain types of client this isn’t a viable option for obtaining funds quickly for a business advantage.

Bridging finance from specialist lenders is different – it can work for both clients with a prime credit status and those without, and for commercial, semi-commercial or business loans.

So if your clients are self-employed, sole traders, partnerships or limited companies, you may be surprised at what’s available, even for the least likely clients.

Tip 3: Going with the flow

For today’s businesses, cash is king. If your clients don’t have the readies, they can’t take up the opportunities – it’s as simple as that.

But at the same time, those opportunities can crop up when least expected and, if finance isn’t to hand, they’ll slip away only to be snapped up by competitors.

It’s in these situations that bridging finance really comes into its own. When that once-in-a-lifetime chance presents itself, clients can get the right amount of money at the right time.

So if short-term liquidity’s an issue, businesses can still generate capital for acquisitions, stock purchases or the latest innovations, keeping them on top of their game and ahead of their rivals.

Tip 4. Bridging the buy to let gap

Continuing on from last week’s tip about having funds available to seize an opportunity - there’s nothing more heartbreaking for your clients than them finding the ideal property, for the purpose of buy to let, before they have the funds available to purchase it.

Clients often face the agony of the waiting game, and run the risk of losing out while other potential buyers gain interest in the property; particularly as the buy to let market gets increasingly popular.

But it doesn’t have to be like that. Bridging loans can be used to purchase a property for the purpose of buy to let, giving your clients quick decisions and allowing them to bridge the gap.

It’s a system that works particularly well for those who don’t wish to miss key investment opportunities to purchase the perfect property for whatever they require.

Tip 5: A renovation opportunity

Following on from last week’s tip on using bridging finance for buy to let – this week we look at other projects clients may take on, such as renovation and the unexpected hiccups which may arise.

Imagine the scenario. Your client has purchased a property to renovate. Its’ big, it’s exciting and they’re really optimistic about the outcome. But then the terms change, their high street lender cannot offer them the funds to renovate and your client is left in the lurch.

It’s a situation that will be familiar to the vast majority of brokers – but it’s one that has a solution.

With bridging finance, funds can be used to renovate the property in preparation for the clients exit strategy. This flexibility can stop ambitious, lucrative investments grinding to a halt.

Tip 6: There when you need it

We are over half way through our series on bridging finance and it’s time to look at how it can help your clients out in what may seem like a crisis.

No business is without some unexpected hiccups and surprises along the way. Companies may often need urgent finance for a sudden bill, tax demand or to satisfy a short term cash flow requirement.

Instead of your clients remortgaging the long term finance; they can take out a bridging loan to cover the short term need. A bridging loan can be provided as a second charge behind a mainstream lender to facilitate this.

Bridging finance is also ideal in a management buy out/buy in situation due to short time scales. It can be used in the interim period before traditional funding is put in place. With bridging finance from specialist lenders, your clients have quick solutions to short term problems.

Tip 7: Second charge commercial bridging

Last week we touched on bridging finance being used as a second charge for short term requirements; and this week we dig deeper into the flexibility of second charge commercial bridging.

Most businesses have their first charge with a high street bank, which can make access to extra funding difficult, as they generally don’t offer further advances on their long term business loans. For your clients, remortgaging with their existing lender is likely to be ruled out, as they won’t 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 brokers should be aware why second charge commercial bridging is so important. It allows your clients’ companies to secure bridging loans 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.

Second charge bridging finance has many purposes and its versatility can help your clients take advantage of short term opportunities.

Tip 8. Managing Debt Consolidation

For many businesses, managing finances can be problematic, particularly when they have lots of commitments to pay a wide variety of costs. As debts start to pile up, a short term bridging loan can allow your clients to consolidate outstanding invoices to avoid such headaches.

Debt consolidation may take the form of a second charge commercial bridging loan, which can provide a business with the vital short term security, cash flow and time required to enable it to sort out its finances in the longer term.

This approach will also enable the business to preserve relationships with its existing suppliers while restructuring its debts into one straightforward and structured payment arrangement.

The message is simple: short-term debts can be paid with a bridging loan making it easier to resolve and structure your client’s finances in the long run.

9. Making a move

Relocating a business can be both stressful and costly – but it doesn’t need to be. A bridging loan is the ideal finance for clients who are relocating to new premises.

A short term bridging loan means that your clients can borrow the right amount of money to cover the duration of the move only. The loan can also help with the associated costs of the move, in terms of hiring removal firms, setting up I.T or refurbishing the new premises.

This is where bridging finance is particularly beneficial as it can helpensure that the client won’t need to dip into company cash-flowto fund the move.

With a bridging loan, your client can pay back the money when the move is complete and the company starts to reap the rewards for the relocation.

10. Build bridges to build your portfolio

Tips 1-9 have highlighted the benefits of bridging finance; and our final tip is recommend that brokers offer the widest possible range of products to their clients.

Every client is individual, with different risk profiles, different funding needs and different opportunities in mind.

So it’s great news that bridging finance from specialist lenders isn’t limited to one product. It’s available across all market sectors; it can be based on a first or second charge; and exit fees can be as low as 0 per cent. It’s this diverse range of options that make it well worth looking into for a huge range of clients - from those with a perfect credit records to those who may have had problems in the past - for personal or business requirements and from land to property acquisition opportunities.

Make sure bridging finance is part of your portfolio, and see what a difference it can make to your clients.