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New business start-ups in the UK are increasingly turning to alternative lenders to help fuel their growth and development. Bridging finance in particular is growing in popularity among the small to medium enterprise (SME) community within the UK.

Certain major banks and lenders consider new business start-ups “high-risk” so they are reluctant to provide finance. This means that despite employing close to 16 million people in the UK and contributing 47% of the total annual turnover for the private sector, new businesses are gaining little access to traditional conventional funding.

In fact, less than 40% of SME companies reported successfully receiving loans from major banks and lenders.

The flexibility of bridging finance

Companies unable to obtain mainstream finance can be helped by the bridging finance sector. Bridging finance is a specialist type of borrowing that secures short-term loans against existing assets. Bridging loans are rarely dependent on income, as often no monthly payments are required, but they are dependent on the equity within the security asset(s) and the strength of the exit, i.e., how the loan will be repaid at the end of the chosen term. Bridging finance is designed to be repaid within a matter of months; however, depending on the situation, the loan can be taken over several years.

For smaller businesses in particular, the immediate benefits of bridging finance are relatively obvious:

• Bridging finance is typically available from £10,000 upwards.
• From application to completion, it can take as little as a few days to access the money needed.
• The most competitive monthly interest rate for a bridging loan is less than 0.5% per month.
• Bridging finance specialists will not automatically discount applicants with an imperfect financial track record or credit history.
• Bridging loans can be used for almost any legal purpose.
• A growing SME, for various reasons, can often need significant funds quickly.

Even when eligibility on the high street is no problem, there are advantages to bridging finance that make it a better option than conventional business loans.

An example of bridging finance in action

A new business start-up is growing faster than expected and has received an influx of sales way beyond its current capacity and infrastructure. The new company needs to expand and develop quickly, recruit new staff, upgrade to larger premises, and purchase new equipment.

The company applied for bridging finance of £200,000 to be repaid at the end of a six-month term. The money was received within a week, and the upgrades were immediately initiated, enabling the new business start-up to operate at a much higher volume. Over £500,000 in sales revenues was generated over the subsequent six months, way beyond the amount needed to repay the £200,000 loan, interest, and fees, and now the company is in a position to handle the increased business volume without any further additional costs.

This is a typical daily scenario where traditional funders were unable to help, but a specialist lender stepped in to arrange the money needed. The now-growing new start-up greatly benefited from a simple and cost-effective bridging loan. The eligibility was assessed only on the basis of the borrower’s security asset along with evidence of a viable ‘exit strategy’ and not on the current or historic income of the business. The firm’s exit strategy was its clear plan for increased sales following cash input from the bridging loan.

Independent broker support

As a new business start-up or SME, it can be difficult to access affordable funding when needed. In addition, taking on any debt during the crucial early days requires careful consideration.

We recommend speaking to an independent broker, such as UK Property Finance, before deciding which path to follow. Whether it is bridging finance or another type of secured property finance loan, comparing the market holds the key to ensuring you get the best possible deal.

Home loans and mortgages are almost always interpreted as the same thing.

You could argue that a mortgage is a type of home loan, given that it is a loan used to purchase a home. There are significant differences between the two in terms of their functions and intended applications.

A home loan is more restrictive with regard to how the funds can be used; a home loan can exclusively be used to cover the costs of buying or constructing a home. Conversely, a mortgage can be used for absolutely any purpose if the applicant meets the required criteria for the loan.

In addition, there are various different types of home loans that fall within the broader classification. Examples of this include commercial property loans, non-residential premises loans, construction loans, top-up home loans, home extension loans, home renovation loans, and so on.

Some types of home loans can be taken out alongside a mortgage as a means of funding a specific project. For example, you could take out a home extension loan to cover the costs of an extension. However, it would be expressly forbidden for the funds to be used for any other purpose. If you were to extend your current mortgage to generate capital, it could be used for any legal purpose.

The main differences between home loans and mortgage loans

To help clarify the confusion, what follows is a concise summary of the main properties of the two types of loans and how they differ:

Home loans

• A home loan is typically issued exclusively for the purchase or construction of a home and cannot be used for any other purpose.
• Home loans are typically issued with a comparatively high LTV, often covering as much as 90% of the property’s purchase or construction costs.
• Cost-effectiveness varies significantly from one lender to the next; interest rates on home loans can be lower than those of a conventional mortgage.
• Borrowing costs can also differ significantly between lenders, typically including an initial processing fee of 0.8% to 1.2% of the total value of the loan.
• Flexible repayment terms are available over the course of anything from 10 to 30 years, in accordance with the preference of the borrower.

Mortgage loans

• The main difference with a mortgage is that the funds can be used in any way the borrower likes. The loan is issued using their home as collateral in the same way, but there are fewer restrictions placed on how the money can be spent.
• A typical mortgage will be issued with an LTV of around 70% to 80% of the market value of the property. Some lenders have begun once again offering mortgages with an LTV of 90% or even 95% to those who meet the required criteria.
• There are major differences from one lender to the next, but the interest rate payable on a mortgage is usually around 1% to 3% higher than that of a comparable home loan.
• The same also applies to processing fees, which, with the typical mortgage, will be around 1.5% of the total value of the loan.
• With a mortgage, it is usually easier to extend the size of the loan and borrow more money should the initial amount be insufficient to cover all costs and requirements.

Whatever your objectives for the funds you need, it is important to seek independent broker support before applying. This will help you not only determine the most cost-effective option available but also get the best possible deal from an extensive panel of specialist lenders.

If you would like to learn more about the differences between mortgages and home loans, contact a member of the team today.

Within the formal written offer of a bridging loan, the loan is often referred to as a mortgage. The reason for this is that there are many similarities that occur between the two, and in essence, they are basically the same thing.

Bridging loans are secured as a charge on commercial and residential property or land within the UK in the same manner as a mortgage.

Some of the main differences, however, are:

• Bridging loans can be obtained without the requirement to make monthly payments, whereas with a standard mortgage, monthly payments are always required (this does not include an equity release mortgage, which is available only to those over 55). The less stringent income requirements allow bridging loans to be taken by clients who, for whatever reason, cannot show or prove the income needed to make monthly payments. Possible reasons for this lack of income proof could be because the clients are retired and are in the trap of being cash-poor but asset-rich, the client is self-employed but without proper proof of income, the client has a minimum income, but the reason for the bridging loan will put them in a better financial situation, etc.
• The maximum term of a regulated bridging loan is 12 months (18 months for an unregulated loan), whereas with a mortgage, the standard minimum term is usually 5 years.
• Credit blips can be acceptable for bridging finance, provided a suitable exit route is proved, whereas only very minimal adverse credit is acceptable for mortgage finance, and only with a very small selection of lenders.
• Mortgages are virtually always taken on a 1st charge basis and on one property, whereas bridging finance is much more flexible and can be attained as either a 1st, 2nd, or 3rd charge and on multiple properties if required.
• Bridging finance, in certain circumstances, can be used for the purchase or refinance of partly completed and/or defective properties as well as land with or without planning, whereas a mortgage, with the exception of niche products such as self-build mortgages, is virtually always used for the purchase or refinance of fully habitable properties, which include those having kitchens and bathrooms.
• Bridging finance is often used for a wider range of loan sizes, starting at L10,000 and with no limits, and also for a much wider range of uses and scenarios.

The main consideration of any lender before allowing a client to take out a bridging loan is how the money will be repaid. Only if lenders are fully satisfied that the exit route is genuine and plausible will they allow a loan to commence.

Property renovation and repair bills are expected to climb significantly over the coming months as builders warn of a major shortfall in the availability of even the most basic supplies. As a side effect of the UK’s booming housing market, builders are struggling to get hold of everything from roof tiles to timber to bags of concrete.

Many have likened it to entering a supermarket to find empty shelves, with the availability of building essentials having totally dried up in some regions. Rather than relying on a stockpile of products to allow projects to be completed, builders are increasingly buying what they need at the last minute, if and when the products they need are available.

As a result, there has already been an increase of around 10% in the costs of building materials, though those in shorter supply are becoming even more expensive. This means that homeowners considering property improvements or urgent repairs over the coming months can expect significantly higher costs as contractors look to augment the prices of building materials.

Seven months of price increases

Timber and steel prices in particular have reached highs not seen for some time, with the IHS Markit/CIPS UK survey having indicated no less than seven consecutive months of price increases to date.

According to Noble Francis, economics director at the Construction Products Association, steel and copper prices have increased by up to 40% over the past six months, while the average price for timber has increased by as much as 80% in some regions.

Even the most basic supplies like varnishes and paints are up to 30% more expensive than they were when compared to the previous year, while the price of polypropylene is up by 60%.

As the vast majority of all building materials used in the construction sector are produced domestically, manufacturers and suppliers have limited on-hand inventory to fall back on.

“You can’t point the finger at anybody because so many different materials have availability issues right now. People who have been in this industry for over 30 years say they’ve never seen anything like it,” commented John Newcomb, the chief executive of the Builders Merchants Federation (BMF).

Another COVID-19 casualty

Many builders and contractors are now facing the prospect of heavy delays in project completion times, with lead times for concrete having increased to as much as three months. Roofers in particular are expected to struggle for the foreseeable future, with raw material costs having increased by around 50% to date.

The issue has been caused by a variety of contributory factors, though it has been greatly exacerbated by the temporary closures of many factories, mills, and production facilities and throughout three consecutive lockdowns. While the government showed lenience with regard to requirements for the construction sector to cease operations, producers are still struggling to catch up with pent-up demand for materials and supplies.

“We’re fighting hand-to-mouth to make sure materials are getting through. It’s just that people have to wait longer, and, of course, raw material prices are going up, so they are having to pay more,” said Newcomb.

“The jobbing builder has traditionally gone into a merchant and said I want three of this and six of that; those days are gone.”

“The key thing is not to go in expecting you can turn up at the door and just take those materials away, because that is not going to happen.”

A client with a number of London-based properties in his real estate portfolio recently approached us for bridging finance in order to fund the purchase of a large office building in the Birmingham area, which he planned to refurbish before selling on for a considerable profit. In order to get the lowest interest rate on the loan, our client managed to raise £3 million using his residential flats in the capital as collateral. Around 8 months into the bridging loan, with 15 weeks to go before the end of the loan term was reached, we called the client to check that everything was on track, which is when we discovered that the agreed exit strategy had fallen through owing to unforeseen circumstances.

As leading bridging loan experts, we set about sourcing an alternative finance plan, which our client could use to settle the outstanding debt plus the associated borrowing fees. The London-based flats that the client had used as security were in a prime location, and with rates being an important aspect of the refinancing solution, we knew exactly who to approach for the required funds.

Within less than a week, we were able to source a new 12-month loan with low borrowing rates and a value of £3.4 million, which solved all of our client’s problems at once while affording him sufficient time to repay the new debt while completing the sale of his recently refurbished commercial property. Both the lender and client were highly satisfied with the new terms, and our client made the profit he was looking for without losing the properties that he provided as security in the first place.

UK Property Finance has a long-standing relationship with many property investors and excellent customer feedback from our clients as a whole. We pride ourselves on only offering the very best levels of service, and we achieve this through the commitment of our staff and the high standard of lenders with whom we choose to work.

UK Property Finance is a “whole of market,” directly FCA-authorised and regulated master finance broker specialising in bridging loans, development finance, and commercial finance. Our “Whole of Market” broker status enables us to source bridging loans and development loans from any lender in the market, enabling us to provide the very best rates.

Comparing mortgage brokers to bridging specialists is a little like comparing apples to oranges. They both exist for a reason and have their own benefits, but they are nonetheless very different entities.

The popularity of bridging finance continues to grow at its fastest-ever pace. Nevertheless, the vast majority of borrowers in need of sizeable sums for property purchases turn instinctively to mortgage brokers. The problem is that the vast majority of mortgage brokers in the UK lack the knowledge and experience to advise on alternative funding solutions.

In fact, it is estimated that less than 20% of mortgage brokers in the UK have no idea what bridging finance is or its intended applications. Let alone the expertise required to advise on bridging financial options.

The traditional mortgage broker

As the name suggests, a traditional mortgage broker is usually an independent adviser for current and prospective mortgage borrowers. They take into account the requirements and preferences of the applicant, consider their available budget, and scour the market for appropriate mortgage deals. Some work exclusively with major High Street banks, while others also consider loans from specialist lenders across the UK.

However, no allowance is typically made for the consideration of alternative funding solutions. Dozens of conventional mortgage and remortgage products may be analysed, evaluated, and presented to the client, but that’s all. If an entirely different funding solution (such as a bridging loan) represented a better option for the client, a typical mortgage broker may be unable to advise on it accordingly.

Bridging specialists

In a similar vein, alternative funding specialists work closely with major high-street names and independent lenders across the UK. They’re also able to offer comprehensive support and objective advice on all aspects of mortgage borrowing.

The difference is that a bridging specialist can also provide access to an extensive range of alternative funding solutions. From traditional bridging loans and development finance to a variety of accessible and flexible secured borrowing options, there’s far more on the table than traditional mortgages alone.

As a result, the borrower stands a much better chance of finding the perfect funding solution to suit their requirements and budget.

Accessible and affordable

The market for mortgages in the UK has traditionally been somewhat restrictive. In a working example, an individual with a poor credit score or no recent proof of income may be counted out of the running, irrespective of their current financial status.

One of the biggest differences with bridging loans (and other alternative funding solutions) is the consideration of all cases by way of individual merit. So even those who may have been turned down by multiple major High Street names could still access the financial support they need with the help of an independent specialist broker.

For more information on the potential advantages of working with an established bridging specialist, contact UK Property Finance today for an obligation-free consultation.

It is often assumed that bridging finance is a facility restricted exclusively to existing homeowners; however, bridging loans can also be surprisingly flexible, accessible, and affordable options for first-time buyers.

Eligibility for bridging finance is assessed primarily on the borrower’s ability to provide acceptable security for the loan. If you have fixed assets, such as commercial property, residential property, or land, with a combined value that covers the costs of the loan, it is of no consequence whether you currently own a residential property.

When would a first-time buyer consider bridging finance?

Bridging loans differ from conventional mortgages in that they are designed to be repaid in full within a term of between 1 and 18 months. In addition, the funds can be made available within a matter of days, and after the first month, interest is charged on either a monthly or daily basis, typically less than 0.5% per month.

A bridging loan for a property purchase (when repaid promptly) can work out exponentially more cost-effectively than a long-term mortgage.

First-time buyers may consider bridging finance for several scenarios, including:

• To purchase a property at auction at a bargain price
• To buy a non-standard property that major lenders would refuse
• To purchase a ‘fixer-upper’ to subsequently sell at a profit
• To avoid the costs and binding obligations of a mortgage

Where a property is purchased by way of bridging finance, the loan can subsequently be repaid by taking out a conventional mortgage, raising the funds elsewhere, or selling.

How is first-time buyer bridging finance eligibility assessed?

For the most part, bridging finance specialists are primarily interested in the applicant’s ability to cover the costs of the loan with appropriate security. Most lenders exclusively accept residential and commercial properties and land as security.

A check on credit history may also be necessary, in accordance with the chosen lender.

Most important is proof of a viable exit strategy. This means providing the lender with a full disclosure of when and how you intend to repay the loan. For example, by selling the property you purchased and generating a profit,

How much can a first-time buyer borrow?

There are technically no limitations as to how much any applicant can borrow; it all depends on the value of the assets you offer to secure the loan. In most instances, however, bridging finance for property purchase transactions is available for up to 75/80% of the value of the property, depending on the individual circumstances of the applicant.

In all instances, it is advisable to consult with an independent broker at the earliest possible stage in order to ensure you get the best deal. Competitiveness varies enormously from one bridging loan specialist to the next, so it is important to conduct a thorough market search before deciding who to do business with.

For more information on any of the above or to discuss bridging loan applications in more detail, contact a member of the team at Bridgingloans.co.uk today.

For many people, their home is their largest and most important investment. Selling a home is a big decision, and it usually takes time and a significant amount of money to make the transaction final. Before your home goes on the market, you can do several things to increase its value. The good news is that these are generally things that are easy to accomplish with a little bit of time and money. When working with a real estate professional, there are a lot of things that they can recommend to make the process easier. For most people, you should budget up to ten per cent of your home for closing costs and other expenses. This is why getting the most out of your home is so important.

Landscaping is a great start

One of the easiest ways to improve the look and feel of your home is through landscaping. Investing in the look around your home can greatly increase the chances of you getting a top price for your home. For a small amount of money invested, you can add ten or twenty per cent to the purchase price of your home.

Get scrubbing!

New homeowners want the home to look clean and tidy on both the inside and outside. Many young families with pets also prefer that a home have a nice fence in the backyard. If you have siding on the outside of your home, make sure it looks freshly painted. Although this seems like a small thing to look at, it can really make your home stand out to new buyers.

Initial price

The initial price that you put your home on the market for is of utmost importance. Over the long term, this can really make your home stand out to new buyers. Never try to price your home too high for the market. Not only does this create a lot of issues for you, but it will make the home sit on the market longer than you would like. Many professionals advise that you figure out what the market value is and price it just below that point. Not only will this make selling your home faster, but it will make it much more convenient as well.

Negotiating is a skill

When it comes to negotiating, you need to make sure that you have multiple people interested in the property. This is why the pricing strategy already outlined makes so much sense. Over the long term, having a quick sale on your home is well worth the few thousand pounds that you take out of the purchase price of the home. With multiple people interested in buying the home, you are able to use leverage and make them pay more than they would otherwise. Overall, selling a home is a huge financial investment. It only makes sense that you spend the appropriate amount of time and money to get as much out of your home as possible.