playfair-finance No Comments

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have withdrawn from the market, but there are still plenty out there.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.

playfair-finance No Comments

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.

playfair-finance No Comments

The land owner, developer and financier relationship.

Hi, it’s Graeme from Playfair Finance here.
Are you a land owner, a developer, or have some money put aside that you
want to do something with but are uncertain of what to do with it? If you
fit into any of those categories, then read on.

In the course of my work, I come across projects where people have got a
bit of land and they’re looking for a developer. Or, I come across
developers who are looking for a bit of land, so I can be a bit of a
‘dating agency’.

One of the things I certainly would like to do is talk to people who may
be private individuals, or have got funds that they wish to invest in this
type of arrangement.

Obviously, I can put you in touch with people and make your money turn into
more money.

There are a lot of people getting into that market which kind of makes a bit
of a mockery, sometimes, of the broker who says ‘I’m whole of market’. We
really can only say that you are ‘representative of market’ because there
are so many new lenders coming into the market nowadays, it’s hard to keep
track of them all.

But it gives you plenty of opportunity for developers to increase the housing
stock, which is effectively what I’m here for. So if that sounds of interest,
then please get in touch by filling out the contact form on this website.

playfair-finance No Comments

I’m currently working on a commercial mortgage for a client. I thought it appropriate
to go through some points that were raised in our recent discussion about commercial
mortgages.

So, most commercial mortgages are going through Tier 1. This is High Street lenders
effectively. You can get fifteen-year terms if you’re doing it as an investment, and
20 years if you’re actually owner-occupier, but High Street banks tend to be capital
and repayment.

The loan to values can be eighty percent for owner occupier, or 100 percent if you are
looking to buy a portfolio which is tenanted. So if it can be shown that it’s genuinely
under market value then effectively you may be able to do it without putting any money
in. In saying this, a lot of lenders prefer to see some ‘skin in the game’.

Tier 2 tends to become a little bit more attractive. This is on the basis of a lower cost
to repay because they will offer either a capital repayment, part and part, or interest-only
facility. So, whilst they will potentially be slightly higher in terms of their interest rate,
it may suit the strategy that you are operating. Because of that, tier 2 might be worth
looking at.

Tier 3. There are less that get there, let us put it that way. But it can be used if
potentially you have some adverse credit. So, if you have adverse credit, not within the
last 12 months, but 12 months or older that can be explained away then tier 3 may well
look to support you on that.

Now, commercial mortgage is obviously for property, but you can also use it for buying a
trading business. So, there are two valuations that you get when you are buying a trading
business that operates from a property, and one of them is called a market value and the
other is market value one, so MV1.

MV1 tends to include an element of goodwill, fixtures and fittings, and things like that,
so you can borrow slightly more if you are going to buy a business that is operating. Do
bear in mind that if you are going to be an owner operator your maximum term is going to
be 20 years. Also, if you are going to the High Street, it’s capital and repayment that
you’ll be looking at.

If you are look to buy a commercial property, or even a trading business and you think we
can help, please get in touch and we’ll be happy to have a conversation and see where it leads.