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Bridging and Development Finance
Bridging or short term finance is the most flexible and quickest way to raise funds from £25,000 up to £100m as it is a pure asset secured facility and does not require you to service the debt during the term of the loan, only to provide a viable exit plan. The funds can be used for you to achieve a number of goals:
Bridging Finance, Purchase of Land, Development Finance, Portfolio Investment, Buying at Auction, Buying Below Market Value, Where speed is the issue to Complete, Chain Breaker, Release Capital, Pay Off Short Term Debts, Improve Cash Flow, Bad Credit Profile, Purchase or Remortgage of Residential or Commercial Property.
Short Term Finance
Bridging or short term finance has changed so much from the ugly duckling to the beautiful bird of paradise, who can always put a smile on your face, and never ceases to surprise us with its flexibility and for breaking new ground. Where this market would be without the short term lenders I hate to think, they have not only filled the massive gap left by the high street lenders they have taken the market by storm seemingly with the motto anything is possible. If we have the valuation and the exit route, we will consider it.
One of the more entrepreneurial lenders are now lending up to 100% of the purchase price, up to 70% of the LTV on BTL, Commercial and refurb investments, music to any developers ears.
This is a massive market with numerous properties being sold way BMV, giving any smart developer room for manoeuvre, and with the residential market picking up, an exit route can be found whether by sale or re-mortgage onto a BTL product.
The more positive mood in the residential market came as a very pleasant surprise, after five years of doom and gloom, lenders are starting open the lending door very slightly, and first time buyers are desperate to get on the ladder and driving the market, and for once not just in London, the ripples are just starting to move across the property pond.
Bridging Finance is an asset based loan secured on land or bricks and mortar, and has a fixed term from one day, to a current maximum period of three years, with a normal maximum loan to value ceiling of 75%, without additional security. The debt does not have to be serviced during the agreed term, as the interest and fees are rolled up within the facility, making it very cash flow friendly. What all lenders require is a viable exit plan, in order that they can be assured the debt will be repaid within the agreed timeframe. Bridging Finance is quick to agree and can be completed very quickly, with the minimum of paperwork.
Purchase of Land
Bridging can be a life saver when trying to purchase land that is awaiting planning, and can then be sold on for development, or where the high street bank is taking their time making a decision, and a bridge will keep the deal alive. Also buying land at auction where speed is of the essence, bridging again comes to our rescue with the minimum of fuss.
Buying Below Market Value
Just how much do developers and Buy To Let Investors love this product when buying property below market value, as Bridging is a pure bricks and mortar loan, we are lending against the value of the property, not the purchase price. If the property is being purchased at way below market value it may be possible to borrow 100% of the purchase price, renovate the property and then re-mortgage onto a normal mortgage product, or sell on and take the profit. You have to get your sums right and the timing is critical, but you can make the value of the property work in your favour and put in far less cash than you would normally expect to.
More About Bridging Loans
What are the main attractions of Short term Finance?
Proof of Income ?
1 You do not have to prove income to service the debt during the period of the facility. All of the interest and charges are rolled up within the loan, leaving you free to concentrate on your business.
Period of the Loan.
2 The period of the loan can be anything from from One day, to in some cases Three years, with no exit penalty and any unused interest being refunded on an early completion.
3 Bridging can be used as a chain-breaker, where clients need to exchange contracts now on their purchase, but have a delayed completion on their sale
4 Buying property at Auction puts pressure on the client from day one with the time frame, whereby clients are expected to exchange contracts 28 days after the deposit is paid on the day of the auction. With Short term finance this is not a problem, and we now also have a new Bridge To Let product that maybe of interest to clients looking to expand on their Buy to Let portfolio.
5 Property Developments.
This is an area where short term finance really shines, and demonstrates just how flexible and adaptable to changing circumstances it can be. The facility can be built around the clients needs with the ceiling on most developments being 70% of GDV, ( Gross Development Valuation ) . With this in mind, how the funds are to be drawn down and at what stages are agreed from outset. Clients are then charged interest only on draw down, with a planned exit route of a sale or refinance of the property. Timing is critical to avoid going outside an agreed time Frame and incurring penalties.
6 Cash Flow
This may not be an obvious area to all clients, but many have found quick and easy access to funds to enable them satisfy some unexpected pressure from their bank on the agreed overdraft, pay off a Tax demand, clear unsecured debts, improve the current level of cash flow.
7 Release Capital
The high street banks at this moment are not exactly opening the doors to new lending and are very risk averse. Some businesses are missing out on the opportunity to buy at the right price, or to expand when the opportunity arises. Short Term Finance may have the key to the bank vault
8 Bad Credit Profile
Having a Bad Credit Profile may preclude you from arranging a mortgage with lenders who base their decision to lend on Credit Scoring, but with Short Term Finance, the exit route is the requirement that is set in stone. If we can satisfy the lender that we are in control of this, your credit profile is not the issue that it would be with most lenders.
All clients should be aware that Short Term Finance is a bricks and mortar mortgage secured facility, normally on a first charge basis, with no requirement to prove that the debt can be serviced from income. What ALL lenders require without exception is a viable and acceptable exit route from the facility at the end or before the end of the agreed term of the facility.
The Financial Conduct Authority does not regulate bridging finance unless it is secured on your principle residence.