Flexible lending through bridging

Despite revolutionary, rather than evolutionary, recent changes in the sector, traditional preconceptions and indeed misconceptions remain commonplace. Whilst the industry has worked hard to overcome this stigma, allying itself with governing bodies and regulatory authorities, many potential customers including brokers, accountants and solicitors, fail to understand exactly what a bridge is and the scope and value that it really can offer.

Bridging is traditionally associated with auction property and property conversions or refurbishment, however, at Bridging Finance Solutions, the firm is increasingly seeing lending from a far broader customer base, with a diverse range of needs.

Steve Barber, Managing Director of Bridging Finance Solutions said: “People are increasingly recognising the merits and scope of bridging finance as it makes it way towards mainstream lending.”

“Today there is no such thing as a typical customer.  Traditionally our clients were developers and builders, however, customers opting for bridging can now range from business owners looking to overcome a short term cash flow situation, solicitors managing a probate case with clients looking to receive funds straight away or accountants advising customers on business account management including issues with tax repayments.”

Steve added: “We are keen to work with more professionals so they can understand the scope of bridging and advise their clients when this form of lending could work for them.”

Education of the professional sectors in respect of the commercial viability and flexibility that bridging solutions can bring to their clients, should be paramount to the sector.

The various ways in which bridging finance can be used are diverse, such as:

1. Raising capital whilst property sells.

2. Professional; funding – tax, probate, divorce

3. Auction purposes

4. Property development, refurbishment, conversion

5. Cash buyer status – negotiate discounts for fast completions

6. Buying a property whilst another sells

7. Purchase of repossession or distressed sales

8. Undervalue purchases

Each bridging loan works in the same way, regardless of the purposes of the loan. Essentially, the loan is a short term mortgage, and like a mortgage the bridging loan needs to be “secured” over property. The principle areas of use include,

Fast Property Purchase

Investors are increasingly using short term funding as a useful way to quickly complete transactions. Bridging Finance Solutions often provides funds to clients within seven working days, but in urgent cases funds can be quicker. Purchasers can be considered as ‘cash buyers’ due to the speed of completion and are regularly able to negotiate discounts in excess of our charges as they are able to act quickly and decisively.

Opportunities to purchase distressed sales, repossessions and vendors looking for a fast sale are typical uses of funding to secure the property whilst long term funding is arranged or the property is sold.

Property Refurbishment

Traditional lenders will often put 100% retention on a mortgage if the property has no kitchen, no bathroom or requires refurbishment. Bridging companies will often lend against properties requiring refurbishment or conversion prior to refinance on to long term bank funding,’ Buy to Let Mortgages’ or sale of the property.

The speed with which bridging facilities are arranged, often ensures that properties can be purchased at genuine discounts.

Chain breaking

If clients are unable to sell property currently owned, but have found new property that they wish to purchase, a bridging loan secured to leverage equity whilst the property is sold.

This is a traditional use of short term finance, and is also used to release funds from increased equity whilst refurbished properties are sold or refinanced in order to move onto another project.

Fast Capital Raising

If clients have property security, a bridging loan is able to raise funds quickly whilst the property is sold or refinanced. Typical uses include tax or VAT payments, temporary cash flow shortfalls, funding of stock or other business requirements.

The release of immediate funds to probate and beneficiaries whilst property is sold in a normal manner whilst attracting the best possible price and similarly for nursing home fees is also commonplace.

The uses of funding in this area is extremely varied and is becoming increasingly recognised by professional advisors as a solution to their clients requirements.

Auction Funding

For clients to bid with confidence at auction, they need one thing above all else – peace of mind that the necessary funds will be available on time. Bridging loans can be provided through pre-agreed Decisions in Principle before, during or after auction.

With typically four weeks to complete post auction date, funding transactions, whilst long term funding is arranged or properties refurbished is a significant growth area.

BFS assist multiple auction houses nationally with funding of sales and providing buyers with confidence to bid.

Education for brokers is key and as the market matures, as will the speciality of individual bridging companies for specific transaction types. One size does not fit all, and it will be the brokers with multiple options who will be able to provide the most cost effective solutions to their clients.

Attributed to Bridging Finance Solutions

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