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Bridging Finance, not just for property.

Bridging Finance is primarily seen as a property related bit of finance
because it can be used to secure against property. That is one of the
easiest ways of getting it, just on the basis that property gives the
bridging lender a relatively understandable exit – in terms of how they
are going to be repaid.

Bridging Finance can be used for business purposes as well. If you have
a shortfall of cash but you know that you have got cash coming in in the
future.Bridging loans are typically six to twelve months, though they
can go up to twenty-four months, so it can be used for different
purposes, if there is an exit strategy.

Now, the one thing to bear in mind with Bridging Finance is that whilst it
primarily doesn’t need to be serviced, so you don’t need to make payments
against it, what happens is that the interest that is building up is that
it gets added up and then taken away from the original loan value that you
have secured.

What this means is that your day-one draw down is actually less than the
value of the loan, to the tune of the fees and the interest, so you really
need to bear that in mind when you are arranging your finance.

The original main loan value will be based on the loan-to-value, but the actual
amount of money that you will have in your pocket will be different to that,
unless you can prove through your income that you are able to service the
interest on a monthly basis, which then releases all of that interest from
the loan into your day-one draw down. This allows you more money upfront,
but you must make a monthly payment. The lender will require proof of how
you are going to do that.

There are still lots lenders out there, and more lenders are coming into the
market. Coronavirus has had a little bit of an impact, in terms of some lenders
have withdrawn from the market, but there are still plenty out there.

If Bridging Finance is something you are looking for, or considering, then
it is still very much on the table. If you need Bridging Finance or want to
discuss your options, fill out the contact us form on this website and we will
be in touch.

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How far in advance should you plan your commercial finance solution?

Today I’m going to talk about the timescales involved for Tier 1, Tier 2, and
Tier 3 commercial lending and commercial mortgages.

In terms of putting a case together, getting it submitted, getting a decision
in principle, getting it credit backed (underwritten), and then the time it
takes to go through the legal process in order to draw down the funds.

The purpose of this is really just to give you an idea, if you’re looking to
buy a commercial property, either as an investment, or for owner operation,
or even a trading business, then these are the timescales that you are going
to be looking at.

I’m going to break it down into tier 1, tier 2, and tier 3. This is slightly
different to some other areas where tier 1 is actually going to be a Business
Development Manager (BDM) that you’re talking to, so you are actually talking
to a person, whereas tier 2 and 3 tend to be more portal based, particularly
tier 2 – where it is either meeting criteria, or it isn’t. Tier 3 depends on
the lender, but some lenders will be BDM and some will be portal.

So, on to the timescales. For a decision in principle for a tier 1 loan, using a
BDM, you will most likely be looking at one to two days. For a tier 2, even
though you would apply through a portal, you would still be looking at one to two
days. If you were processing a tier 3 loan, you could have a decision in principle
back in as little as four hours, though this could go up to two days. So, for all
three tiers, it is best to err on the side of caution and plan for the process to
take up to two days.

If you then want to get that decision in principle credit backed, because you are
happy with the deal that’s offered, then that process can take up to 4-5 days,
depending on how quickly an evaluation can happen, and then from evaluation and
credit backing, the timescale to actually draw down the funds varies.

For tier 1, you can look at drawdown taking ten to twelve weeks, tier 2 can be
eight to twelve weeks and for tier 3, you can expect it to take eight to ten weeks.

If you are thinking of going through this process, ideally, you should attempt to
plan anywhere between three and a half to four months ahead of the time that you
want the process to be completed. There is, of course, an option if you want to
do it quicker.

You can look at Bridging Finance (which will be the topic of next week’s blog), so
if you are unable to secure it within the time scale of the three and a half to
four months, as long as the ability to refinance was there, you would be able to
secure the asset quickly.

A lender for a bridge would want to know what your exit strategy for the finance
was, and your exit would be to refinance. As long as you are able to show that
you are able to refinance, then the bridge should be forthcoming.

If you want to discuss these or other business finance options, get in touch by
filling out the contact form on this website and we can work out what solutions
will fit your needs.

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Bridging Finance and the impact of Coronavirus

We provide services to businesses who need assistance with
all types of finance, including Bridging Finance.

Hi, my name is Graeme Shevas.

I help businesses who need assistance with Bridging Finance and I
wanted to give an update on the Bridging Finance Market as a result
of Coronavirus and any impacts that it may have had. The first
thing to note, really, is that there are still plenty of bridging
lenders out there willing to lend, but there have been a couple of
impacts.

The main impact really is that some lenders have been withdrawing
from the market, and other lenders are actually finding that the
funds that they have available to lend are reduced. This is as a
result of people who are coming to the end of a bridge and not
being able to refinance, due to the current situation. They are
finding that the bridges are lasting a little bit longer, so the
funds aren’t coming back into the coffers in order to be able to
loan them back out again. There are some lenders who have not
completed on deals, or who have had deals that were not completed
and have now withdrawn the offer of finance. So, it’s a bit of a
mixed bag.

The main thing to note, really, is that the amount of money that is
loaned out on a bridge has actually reduced as a result of the value
decreasing. So, if you’re looking at a property transaction for the
bridge and the loan-to-value against which it will be secured is
probably, on average, about 10 percent down, largely to do with the
valuations, in terms of getting a desktop valuation done and reducing
the amount of risk involved in that.

So, the bottom line is that they are still available, there are lots
of lenders, and if you have a funding gap and it wasn’t necessarily
property related, maybe it was to do with business, as long as you
can prove an exit, (i.e. a way of actually repaying it in a period of
time, so maybe you’ve got other funds coming in our you’re waiting for
some finance against a commercial property or you’re trying to sell
something and the money has not come in yet but you desperately need
it now) it’s still available.

Bridging Finance is a flexible bit of finance which will suit many needs.
If this is something that is of interest to you or you want to discuss
it further, you can reach me on 07776 257 342,
email graeme@playfairfinance.co.uk or fill out the
‘Contact Us’ section on this website.

For more interesting hints and tips, you can also visit our YouTube
channel at https://www.youthttps://www.youtube.com/channel/UCbvTGclIvFBNhr1GwC3rFSQ/videosube.com/channel/UCbvTGclIvFBNhr1GwC3rFSQ/videos