FC Barcelona have rarely been out of the headlines over the past few months, primarily due to the sensational departure of Lionel Messi after a lifetime spent with the club.

The president of FC Barcelona, Joan Laporta, has spoken of the “very worrying” financial situation the club is currently in. Having revealed that Barcelona is now approximately €1.35bn (£1.15bn) in debt, he blamed what he referred to as a “terrible inheritance” on his predecessor, Josep Bartomeu.

He also highlighted Lionel Messi’s departure as a key factor in the “dramatic” situation Barcelona now faces, resulting in a Goldman Sachs bridging loan valued at €595 million being taken out to save the company from outright bankruptcy.

Laporta remains adamant that Bartomeu should be held accountable for the financial meltdown currently taking place behind the scenes.

His comments came at a recent press conference when he cited excessive salaries as one of the reasons behind the club’s unsustainable financial position.

“Our salaries represent 103 per cent of the club’s total income. That’s 20–25 per cent more than our competitors,” he said.

“The first thing we had to do when we arrived was to ask for a loan of €80 million because otherwise, we could not pay the salaries. The previous regime was full of lies.”

He also went on to blame his predecessor for leaving him with huge stadium repair and maintenance bills to cover, along with failing to be truthful about promised wage cuts.

“We also found that we had to do some urgent repairs to the Camp Nou because otherwise, it posed a risk to the attending fans. We also found out that the club had already received 50 per cent of the TV rights fees in advance.”

“We found the wage policy in the form of an inverted pyramid: veterans on long contracts and youngsters on short deals. There were no wage cuts.

“We have found that disproportionate payments have been made to intermediaries, not even agents.”

Speaking on behalf of Sky Sports News, Kaveh Solhekol warned that FC Barcelona is currently in a “terrible” financial situation, with no obvious way out for the time being.

“Barcelona has a negative net worth of €451 million; it is a terrible inheritance. What has been happening is very worrying,” he said.

“Bartomeu’s (open) letter is an effort to justify management that is unjustifiable. It is an exercise in desperation. They are responsible for everything until March 7. They will not escape their doing.”

Speaking on the future of the club, Laporta spoke confidently about Barcelona’s ability to resolve its financial troubles while confirming its receipt of a bridging loan worth “€550 million with an interest rate of 1.1 percent to restructure the club.”

“The situation is dramatic, but we have good news,” said Laporta.

“The strategic plan based on our credibility and experience and on the assets that Barcelona has makes this situation temporary. I think that in a couple of years, the club’s economy will be healthy.”

“We are not scared at all. We are highly motivated and positive, and morale is high. It’s a big challenge, but we are capable of overcoming it.”

“I’d like to call on all Barcelona fans and the entire club to be united. With football and unity, I’m convinced this era will be full of success.”

A bridging loan is essentially a short-term commercial loan secured against an appropriate property or asset. It is designed to be repaid within a matter of months; bridging finance can be uniquely cost-effective over the short term.

Another major point of appeal with bridging finance is the speed with which it can be arranged; typical loan completion times are no longer than two weeks, though it is often possible to access the funds required within just a few days.

This can make bridging loans an immensely useful and versatile product for smaller businesses that routinely encounter unexpected outgoings and cash flow shortages.

How does a bridging loan work?

Bridging finance works in almost exactly the same way as a typical secured loan; the funds are issued against an asset of value, typically the applicant’s home or a business premises, and are repayable by the borrower along with the agreed rate of interest.

What differentiates bridging finance from a typical secured loan is the short-term nature of the facility. Bridging finance is designed to be repaid within a few months in the form of a single lump-sum payment on an agreed date.

There are typically no monthly instalments for the duration of the loan, and the balance in its entirety is repaid in a single payment.

What can I use bridging finance for?

Bridging loans are also advantageous in that they can be used for any legal purpose whatsoever. If you have an asset of value your lender is willing to accept, the funds raised can be invested or allocated in any way you like.

Just a few of the most popular uses for bridging finance are as follows:

• Purchasing properties at auction at rock-bottom prices.
• Buying non-standard properties to refurbish or repurpose.
• Covering urgent outgoings or unexpected cash flow shortages.
• Investing in equipment and machinery for business purposes.
• Relocating to new premises or property expansions.
• Paying tax bills to avoid possible penalties.

In all of the above instances, bridging finance can be more convenient and cost-effective than any conventional loan. again, under the strict condition that the funds are repaid in a timely manner as agreed.

Who can qualify for bridging finance?

As with all loans, lending criteria vary significantly from one lender to the next.

As a general rule of thumb, you can expect the following verification checks as part of the application process:

• Proof of identity and residency.
• Evidence of a viable exit strategy (repayment plan).
• Formal valuation of your property.
• Proof of income and expenditure.
• Verification of current financial position.
• Full credit history check.

In spite of the above, it is worth remembering that many lenders issue bridging finance primarily on the basis of security. If the value of the property used to secure the loan vastly exceeds the total loan value, other verifications (like credit history checks) may not be necessary.

If you have any questions or concerns regarding your eligibility for bridging finance, ensure they are raised with your broker before applying. This will help ensure you target the right lenders with your application in order to secure an unbeatable deal.

Popular culture has played a major role in encouraging more people than ever before to try their hand at ‘flipping’ homes and commercial properties. Interest in the “fixer-upper” properties is at an all-time high, as younger demographics in particular set their sights on building their dream homes for cheap or turning a comparatively quick profit.

However, experts continue to stress that the risks associated with purchasing fixer-upper properties must not be underestimated. More specifically, potential buyers are being advised to follow five essential guidelines before committing to the purchase of a property for renovation.

Arrange a comprehensive survey

It is always advisable to organise a more intensive building survey than would normally be conducted. This will ensure that you gain detailed insights into the renovations, repairs, and improvements necessary to restore the property to an appropriate standard. In addition, a detailed building survey could provide you with useful information as a basis for negotiating a more competitive price.

Consider financial products in advance

Do not make the mistake of waiting until the last minute to consider the funding options available. This is because properties that are considered uninhabitable may exclude you from most conventional high-street mortgages. Specialist property loans for fixer-upper properties are available, but they often call for independent broker support to access them. Fully research the options available ahead of time in order to ensure you understand what is on offer, how much you will be expected to offer as a down payment, and so on.

Factor the price of the property against the repairs required

This may also call for specialist help, as it may be difficult to accurately calculate the total costs of the renovations required without an experienced surveyor or contractor. It is essential to come up with an accurate total figure for the renovations and improvements you intend to carry out in order to determine whether the property is worth purchasing at its current price.

Anticipate the prospect of exceeding your budget

Research suggests that close to half of all fixer-upper property projects result in their buyers exceeding their budgets. You should therefore ensure you have some kind of backup plan available in the event that you run short on money at the worst possible time. This could be something as simple as putting off less urgent renovations until a later date or considering a mortgage extension if available.

Consult with an independent broker you can trust

Lastly, involving a reputable independent broker at the earliest possible stage is highly recommended. Along with helping you find the most competitive loan to fund the project, a broker can provide you with the independent advice and support you need to make a safe and informed decision.

Bottom Line: The bridging sector saw a combined fall in lending of £278 million last year, but evidence suggests the market is bouncing back from the impact of three consecutive lockdowns.

Collective bridging transaction completions were down by £278 million last year.

The average LTV on bridging loan issues decreased to 50%.

Bridging loan interest rates fell to historic lows during the fourth quarter.

Regulated and unregulated loans occupied an equal share of the market.

The most common application for bridging finance in Q4 was chain breaking.

The economic fallout attributed to the first two national lockdowns had a major impact on the bridging finance sector last year. As a result, total transactions for 2020 were down by approximately 38% from the previous year, to £455 million compared to £732.7 million in 2019.

Decreases in bridging finance activity were particularly prominent during the first six months of 2020, when the UK’s real estate market was temporarily shut down in its entirety. In the first quarter, bridging loans valued at a total of just under £113 million were issued. By the end of Q2, this had plummeted to just £79.4 million as lockdown restrictions took effect.

However, reassuring signs of improvement were noted during the closing six months of the year. Total bridging finance activity in Q3 came out at £115.52 million, increasing further to £137.22 million in the fourth quarter.

The latest figures released by Bridging Trends highlight a series of key findings for 2020. Bucking the trend of previous years, there was almost no difference in the share of the market occupied by regulated and unregulated transactions in 2020. Regulated transactions accounted for 36% of the market in 2018 and 39% in 2019, last year climbing to an impressive 49.4%.

Average monthly interest rates also fell to record lows during Q4, averaging just 0.72%. This is more than a full percentage point lower than the 0.85% peak recorded in Q2, which was followed by a fall to 0.78% in the third quarter.

Evidence suggests that bridging finance specialists are continuing to distance themselves from high LTV products, with the average LTV on a bridging loan last year coming out at 50.7%, significantly lower than the 52.9% and 54.6% of 2019 and 2018, respectively. The lowest average LTV of all was recorded in Q2 at the height of lockdown, 48.8%.

23% of the bridging loans issued in 2020 were second-charge loans, presenting a sizeable uptick of 20% from the year before. Q2 in particular saw a major spike in second-charge bridging transactions, an all-time record high of 26.1%.

Primary applications for bridging loans changed little from previous years, with funding investment purchases once again topping the table for the year as a whole, accounting for 22% of all transactions. Interestingly, chain break overtook investment purchases in the fourth quarter, accounting for a full 23% of all bridging loans. Bridging finance for business purposes came out with an annual market share of 11%; heavy refurbishment also accounted for 11% of all transactions last year and 12% of the bridging loans we used for regulated refinance purposes.

On average, bridging loan completions took 50 days in 2020, slightly longer than the 47-day average in 2019.

The average loan term in 2020 was 12 months, the same as in 2019. The average completion time averaged 50 days, up from 47 days in 2019 and 45 days in 2018.

Gareth Lewis, commercial director at MT Finance, comments:

“After the first lockdown, we saw the re-emergence of some larger lenders, and if you combine this with the stamp duty changes, it is no surprise that there was a stimulus on rates and regulated bridging in the latter part of the year.”

“As the vaccine rolls out and we gradually emerge from this lockdown, I believe we will see a new transactional flow from renewed confidence in the economy and businesses re-establishing themselves.”

Dale Jannels, managing director at Impact Specialist Finance, comments:

“The impact of the pandemic on the bridging sector is shown clearly in Q4’s data, but it also alludes to the activity we are now experiencing, some of which, but not all, is related to the Stamp Duty Holiday deadline.”

“It’s clear though that bridging finance is becoming better understood by the wider broker market (not just those in the specialist sector), and there is more confidence about the options it can provide customers, which should mean that 2021 could see a real watershed moment for this type of finance.”

Kevin Blount, head of operations at Clever Lending, comments:

“We certainly had an increase in inquiries during Q2, which led to a spike in new business submitted to lenders in Q4. We are working hard with lenders to find solutions, who in turn are reviewing their criteria and interest rates to fit the current market.”

“The SDLT holiday helped to bring business to the bridging market, which is continuing into 2021.”

Chris Whitney, head of specialist lending at Enness, comments:

“I am actually quite surprised that the fall in lending quantum in 2020 was so large. The market has always ‘felt busy’ and Enness did not see such a big drop in lending volumes.”

“Yes, we did see some big names close their doors as the whole country was forced to work out their strategies in the face of the pandemic on a micro and macro scale, but some still aren’t back as they were. However, I think most of the short-term lending market either carried on throughout or paused only temporarily as working practices were refined and made fit for purpose under the restrictions we faced, as well as the level of uncertainty that still hangs over us.”

“The absence of some big names has reduced supply, coupled with some restricting LTVs, which has had a marked impact on lending levels. I think this is also reflected in the fall in average LTVs over the year.”

“However, as the trend in Q3 and Q4 indicated, I think we will see volumes bounce back quite quickly, and with people re-entering the market, the data is reflecting the stiff competition lenders face for business in terms of lower interest rates.”

“There are some big high-street names who see themselves as ‘business banks’ but I know from first-hand experience that many did not step up to the challenge and support their customers as they should at this time. Borrowers were turned away or faced a huge amount of red tape to navigate on their own, not being able to get the support they needed so badly in a timely manner.”

“I think this is reflected in the increase in second-charge loans and the increase in regulated loans as well. The mainstream high-street lenders made it very hard to increase current loans, and if they did, it was taking much longer than normal. Consequently, I think that is why we see ‘chain breaking’ high on the list for uses of bridge loans. Lots of borrowers use bridge loans as an essential tool on a regular basis, but I think we have seen an increase in new to the sector borrowers, which has contributed to a shift in some of the historic dynamics.”

“I think overall the short-term lending market can be proud of what it managed to achieve in unprecedented times. I know there are an awful lot of people who are very grateful, whose businesses, personal lives, and families are better for what the industry was able to offer them.”

“I am sure 2021 will have its challenges, but I feel our industry is ready to take on whatever is thrown at us.”

It remains to be seen whether the government decides to extend the stamp duty suspension deadline beyond March 31 next year. In the meantime, short-term loans like bridging finance could help movers and buyers make the most of the temporary stamp duty holiday.

COVID-19 has had a major impact on all aspects of the housing market. On the High Street, major banks and lenders are processing applications and authorising mortgages much more slowly. Elsewhere, the property chain as a whole is moving at a sluggish pace, often compounded by disruptive bottlenecks.

All of which would be inconvenient at the best of times, though the main concern is with the stamp duty suspension deadline fast approaching. There’s still technically time to organise a home loan, but considering much faster and more accessible funding like bridging finance is nonetheless advisable.

The speed and simplicity of bridging finance

Bridging finance outpaces all traditional property loans and mortgages by a clear margin. Depending on your requirements and personal circumstances, the money you need to purchase a property could be yours within a matter of days.

Specialist lenders issue bridging loans almost exclusively on the basis of security, i.e., the value of your current home or any other qualifying assets you choose to use. If your security is considered viable and comfortably covers the costs of the loan, there’s every chance you’ll qualify and gain access to the money in no time.

By contrast, a conventional home loan or mortgage in the current climate could see you sitting around for days or even weeks, simply waiting for a final decision to be made.

As the government’s stamp duty suspension applies to properties with a market value below £500,000, it applies to approximately 90% of all residential property purchases. This in turn means that nine out of 10 buyers planning purchases between now and March could capitalise on the offer, saving an average of £4,500.

How bridging finance works

A bridging loan differs from a conventional mortgage in that repayment is required within a much shorter period of time. Whereas a mortgage may be repaid over the course of five to 35 years, bridging loans are almost always repaid within six to 18 months.

Interest on a bridging loan therefore applies on a monthly basis, often less than 0.5% with a competitive deal. The funds are made available within a matter of days, the property is purchased, and the loan is repaid in full at a later date when the borrower’s existing home sells.

Where used to leverage the government’s stamp duty suspension, bridging finance could prove particularly profitable. Sourced from a leading lender and repaid as quickly as possible, the subsequent £4,500 average stamp duty saving could cover several of the loan’s major borrowing costs.

For more information on the potential benefits of bridging loans or to discuss the mechanics of the temporary stamp duty holiday in more detail, consult with a member of the team at Bridgingloans.co.uk today.

2021 is projected to be a potentially prosperous year for the bridging sector, with activity having already reached record highs despite lockdown restrictions.

That is according to Shawbrook Bank’s newly published Bridging Market Bulletin, which indicates the highest volume of bridging applications ever recorded for the third quarter of 2020. In addition, the market’s return to strength after the initial national lockdown brought a huge 40% increase in bridging loan completions for the same period.

The figures from Shawbrook reflect the predictions of many analysts and economists, who expected to see a major uptick in activity due to the easing of lockdown restrictions and the impending deadline of the government’s temporary stamp duty holiday.

Particularly due to the limited time available to secure funds before the March 31 deadline, more movers and buy-to-let investors than ever before are considering fast-access funding like bridging loans.

Bridging finance activity acceleration

Speaking on behalf of Shawbrook Bank, sales director Emma Cox expressed optimism about the way the bridging sector is headed going into 2021.

“It’s been a difficult time for the property market, and of course the current landscape has left many facing challenges, especially within the bridging space, where some lenders had to halt business in this area for a period of time during the height of the pandemic,” she said.

“It is positive to see many of these lenders recently return to the market, and as our report shows, to see that the housing market is moving again.”

Miss Cox also stated with confidence that the up tick in bridging finance activity is not attributed exclusively to the temporary stamp duty holiday or the release of pent-up demand on the sector. She instead believes that interest among investors in general will continue to fuel the market’s performance even beyond the March 31 deadline.

“Whilst some of this activity in the bridging market will no doubt be down to the release of pent-up demand—something that Rishi Sunak’s stamp-duty holiday will further support—we are also seeing an uptick in investors looking at alternative strategies to sure up investments,” she said.

“The use of bridging to carry out refurbishments and conversions, as well as to aid chain breaks due to elongated sales processes, is an essential funding option that can support lucrative investment opportunities”.

“We recently announced revised pricing across our bridging range, with rates now starting at 0.5% for both regulated and unregulated products, in order to show our continued appetite to aid brokers in making the most of these opportunities.”

“The bridging market has demonstrated remarkable resilience throughout this year, and as much as we may face more challenges towards the end of 2020 and into the early parts of 2021, we believe this adversity may create opportunities for investors and brokers, which Shawbrook plans to continue to support as much as possible”.

Increasingly, the UK’s biggest banks are becoming more reluctant to do business with a growing number of applicants. Mortgage underwriting processes are becoming more complex, and self-employed applicants are facing excessive scrutiny, meaning those unable to access large deposits need not apply.

Little wonder, therefore, that so many are taking their business elsewhere and seeking the support of specialist lenders away from the High Street.

Bridging finance is a booming sub-sector of the industry. While high-street lenders continue to tighten the screws, bridging loan specialists are relaxing their lending criteria, increasing maximum loan-to-value ratios, and even welcoming applicants with poor credit.

The fact that bridging loans can take days to arrange (as opposed to months with a conventional mortgage) is another major point of appeal for many applicants, and many mortgage lenders are now taking much longer to process applications than pre-pandemic.

Flexibility, affordability, and accessibility

Bridging finance has the capacity to effectively reverse almost every complication associated with sourcing traditional high-street loans. Typically secured against the applicant’s property, bridging loans can be offered at a monthly rate of interest of less than 0.5%.

When repaid over the course of months rather than years, bridging finance can potentially be more cost-effective than a traditional mortgage or secured loan.

The speed and simplicity of bridging finance are likely to appeal to those looking to beat the looming stamp duty suspension deadline, potentially fuelling another major spike in activity.

It is highly likely that we will start to see even more people using bridging loans to buy the properties they want quickly and take advantage of the stamp duty holiday. This demand will increase while mainstream lenders are unable to meet the needs of borrowers in the timeframes they require, particularly for higher-value properties where the savings could be up to £15,000.

Other industry watchers have noted a significant increase in the number of applicants using bridging finance to secure properties, subsequently switching to longer-term mortgages to repay the balance more gradually.

However, emphasis was placed once again on the importance of factoring all borrowing costs into the equation when arranging bridging finance.

Often, bridging loans come with an arrangement fee of up to 2%, which on a £500,000 loan would be £10,000 of the £15,000 stamp duty savings.

There would also be survey and legal costs to arrange the bridge, which are in addition to the costs that would be needed for the loan term.