Being hit by an unexpected tax bill is never an enjoyable experience. Businesses, investors, and property developers may find themselves facing tax obligations at a time they didn’t expect. Irrespective of the nature and extent of the bill, settling tax liabilities as quickly as possible is essential in order to avoid serious legal consequences.

When time is a factor, bridging finance can be the perfect solution to settling tax obligations in a quick, convenient, and cost-effective way.

Expecting the unexpected

Most tax bills are completely predictable and can be budgeted for. Businesses and investors are therefore expected to conduct their financial affairs responsibly in order to ensure their ability to meet their tax obligations when required.

Nevertheless, there are various instances where even the most responsible organisations and individuals encounter demanding and difficult situations. For example, anyone inheriting an estate with a value in excess of £325,000 will need to pay inheritance tax. Capital gains tax is also payable when selling capital assets, such as properties.

One of the most common instances where specialist types of bridging loans are used to cover tax payments is when a commercial property is purchased. When a business or an investor buys a commercial property, they are liable for an additional VAT payment of 20%. This could amount to tens of thousands of pounds on top of the purchase price of the property, alongside all other fees and outgoings.

Companies that are VAT-registered can reclaim this money, but not until the current VAT accounting period comes to an end. This means waiting up to three months for the VAT refund, during which the buyer must contend with a significant shortfall.

If it is likely that this 20% VAT payment would have negative implications for the buyer, they could take out a short-term bridging loan to augment it. After which, the balance on the loan could be repaid in full (plus a small interest fee) when the VAT is returned, ensuring their cash flow isn’t adversely affected for the duration.

Bridging loan eligibility

The potential benefits and applications of bridging finance are limitless. Establishing eligibility for a bridging loan can be surprisingly simple, starting with a bridging loan calculator to get an idea of the available options.

Bridging finance can be secured against almost any type of property, with no specific limitations on how much can be borrowed. In addition, a bridging loan can often be accessed within 2 to 5 working days, making it the ideal option for covering urgent outgoings and unexpected bills.

Even with an imperfect credit history, there is still every chance you will qualify for a bridging loan if you can provide security to cover the balance in full.

For more information on the benefits of using bridging finance to pay urgent and unexpected tax bills, book your obligation-free consultation today with a member of the team.

Property development financing is available in a variety of forms to suit most requirements and budgets. Increasingly, bridging loans are being sought by property developers across the UK to fund large and small projects.

But what is it about the bridging loan that makes it such a popular choice? Why are more investors choosing bridging loans over conventional property development finance than ever before?

Here are some reasons:

• Bridging loans are fast: Bridging loans are one of the fastest-access lending streams available for property developers. From application submission to provision of the funds, it can take as little as 3 to 5 working days, making it an ideal option when time is a factor.

• Bridging loans are flexible: Most bridge loans are tailored to suit the exact requirements and budget of the borrower. Along with flexible repayment terms, it’s also possible to qualify for a bridging loan with a poor credit history, due to bridging finance being far more flexible than more traditional mainstream loans and because monthly payments are rarely required.

• Bridging finance can be used for almost anything: Although most often used for a property purchase, a bridging loan can be used for almost any legal purpose. In addition, it’s also possible to secure a bridging loan against almost any type of property or land, provided it covers the total cost of the loan with sufficient excess.

• Competitive borrowing costs: Bridging loans are short-term loans designed to be repaid within a matter of months rather than years. Interest rates start at below 0.5% per month, coupled with minimal overall borrowing costs. Early repayment is also usually an option with bridging loans without facing heavy penalties or levies.

• Auction property purchases: One of the most common applications for bridging loans in the property development sector is for the purchase of auction properties. The funds required to purchase a property at auction can be made available quickly, with the loan subsequently being repaid in one lump sum when the property is sold or refinanced.

• Purchasing uninhabitable properties: Many mainstream lenders will only issue loans against properties that are considered habitable at the time of the application. With bridging finance, it is possible to secure a loan against an uninhabitable property with the intention of renovating or redeveloping it.

• No deposit is required: Another benefit of bridging finance is that no physical deposit is often required to set up the loan, as additional security can be used to cover this. Eligibility is determined primarily by the value of the property or land used to secure the loan.

For more information on the benefits of bridging loans as a form of property development finance, contact a member of the team at UK Property Finance anytime.

Bridging loans are a specialist type of secured loan that can be particularly useful in time-critical situations. Secured loans in general can be quicker and easier to arrange than unsecured personal loans, but the underwriting process can still be lengthy in the case of larger secured loans, such as mortgages.

Speed is one of the reasons bridging loans have become the go-to finance product for both businesses and consumers in situations where turnaround time is of great importance. When time is critical, there is perhaps no faster or more convenient option available than bridging finance.

You will need to have sufficient security to cover the loan amount, but the application and underwriting processes are generally much simpler than those of other types of secured loans.

Specific instances where bridging loans are considered the ideal alternative to a traditional secured or unsecured loan include:

Fast property purchases

One of the most common applications for bridging finance is purchasing properties at a bargain price before your competition. Whether commercial or consumer, getting a great deal on a property often means snapping it up quickly while the opportunity exists. Instead of waiting months for a traditional mortgage application to be approved, bridging loans can be paid out within a matter of days.

Buying property at auction

The same also applies to properties that go under the hammer at auction, which can often be purchased for well below their market value. The only proviso is that you rarely have more than 28 days to pay for the property in full. This timeframe is often out of the question with traditional mortgages but perfectly possible with a bridging loan.

Urgent business expenses

Businesses can face unexpected outgoings and/or higher-than-expected costs. Unfortunately, these unexpected costs often arrive at the worst possible time. There are countless applications for bridging loans in a business environment, i.e., urgent tax payments, critical business equipment replacements, etc.

Avoiding repossession

The importance of urgent action to avoid repossession needs no explanation. The prospect of losing your home or business property can be a terrifying prospect, but bridging finance can be used to quickly rectify the problem. Bridging finance can be used to repay repossession debts, enabling the owner to retain full control of the property and its destiny.

Probate and inheritance tax problems

Time can also be a factor when it comes to probate and inheritance tax issues. Bridging finance can be used to meet the tax obligations, allowing the applicant to realise the inheritance.

We recommend that you always seek professional, independent advice if you have any concerns or questions regarding probate and inheritance tax issues.

Property repairs and updates

If the property where you live or let falls into disrepair, you may be legally (or at least ethically) obliged to bring it back into line. Depending on the nature and severity of the issue, immediate and extensive repairs may be necessary. In this case, a bridging loan could be an ideal short-term solution for correcting problems before they are allowed to deteriorate further.

Buy-to-Let purchases

Bridging finance can also be perfect for extending a buy-to-let property portfolio. If and when the perfect property is found at the right price, rather than missing out on the investment opportunity of a lifetime, one or more of your existing properties or even the new property can be used as security for bridging finance, enabling you to purchase and expand your portfolio within a matter of days.

It’s not uncommon for buy-to-let investors to set their sights on properties in need of repairs and refurbishment. The reason being that, as competition for such properties is relatively low, they can often be picked up at rock-bottom prices. After which, the repairs and refurbishments can be performed at an equally low price before turning a profit on the property by letting it out to tenants.

Unfortunately, targeting properties in need of renovations or refurbishments can lead to problems with financing the purchase. This is because the vast majority of traditional lenders will only issue mortgages against properties that are considered habitable at the time of the application. Even if you can demonstrate your intention and capacity to renovate the property after the purchase, you’re unlikely to qualify for a traditional mortgage.

In addition, landlords often seek to expand their buy-to-let property portfolios by purchasing homes at auction. Some are in need of repair; others are perfectly habitable. In both instances, however, it is usually necessary to pay the full purchase price of the property (and any additional fees) within 28 days, sometimes sooner. Needless to say, this is nowhere near enough time to organise a traditional mortgage.

Combined with the increasingly restrictive lending criteria of major banks for buy-to-let landlords, all of the above places prospective investors in a tricky position.

A flexible and accessible alternative

This is precisely why bridging loans are fast becoming the new top choice for buy-to-let investors. A dynamic and flexible type of secured lending, bridging finance goes far beyond the limitations of traditional high-street mortgages.

For one thing, most bridging finance specialists are uninterested in the condition of the property. Even if it is in a pretty sorry state of repair, it has no real consequence for the lender. Instead, the only thing that matters is the borrower’s capacity to cover the loan with acceptable collateral. This may be provided in the form of the property being purchased or any other property currently owned by the applicant.

Likewise, bridging finance can be uniquely convenient and accessible for purchasing buy-to-let properties at auction. Irrespective of how much money is needed, it can typically be organised and transferred to the applicant within five working days. Again, it’s simply a case of the applicant putting up the necessary collateral to cover the loan. The nature and condition of the property being purchased are of no real interest to the lender.

What matters most with a bridging loan are two things: collateral and a viable exit strategy. By exit strategy, this means a clear and validated method of gaining access to the money needed to repay the loan on the agreed date. It’s possible to take out a bridging loan without an exit strategy, but this may, depending on the lender and the loan, result in higher overall borrowing costs.

Speaking of which, the potential value for money of a super-short-term bridging loan also appeals to buy-to-let investors. In many instances, it’s possible to borrow significant sums of money for less than 0.5% per month. Just as long as the loan is repaid quickly (in accordance with the agreement of the lender), overall borrowing costs can be kept to absolute minimums.

The importance of comparing the market

Now more than ever, the importance of comparing the market in full cannot be overstated. Particularly when considering buy-to-let investment opportunities, it is essential to consider as many deals as possible from as many lenders as possible.

The quickest and easiest way is to take your case to an independent broker, who can compare deals from a panel of specialist lenders on your behalf.

The housing situation for most would-be buyers in the UK right now is pretty bleak. Particularly for first-time buyers, millions of whom face the prospect of never owning their own home.

But what’s interesting is how, at the opposite end of the spectrum, individuals interested in buying second homes (or holiday homes) are increasingly setting their sights overseas. Given the inevitable complications of buying abroad, why are there more Brits than ever before considering international property investments?

The overseas property market

For most, the primary motivating factor is affordability. In some regions, average property prices have plummeted by as much as 70% over recent years alone. As a result, Brits buying abroad are able to make their budgets stretch considerably further than they would at home.

What’s more, the desire to snap up bargain properties while the opportunity exists is prompting a growing number of borrowers to consider more immediate short-term loans.

Florida has become an appealing investment prospect for more British homebuyers than ever before. Primarily due to sub-prime issues, average house prices in several attractive regions across Florida have fallen by more than 70%. Over in Spain, research suggests there are currently more than 700,000 unsold holiday homes, which are plummeting in value all the time. In addition, average house prices in several key coastal regions have fallen by around 50%.

For some, the appeal lies in the prospect of purchasing an attractive overseas property to let out. For others, it’s a case of being able to pick up a dream holiday home at a bargain price. Or perhaps a second home to eventually move to for permanent residence during retirement.

No matter how extensive or limited their budget may be, would-be buyers are finding overseas investment opportunities near irresistible.

Local mortgage complexities

One of the biggest obstacles standing in the way of overseas property ownership tends to be arranging finance. For obvious reasons, getting a local mortgage from an overseas lender can be far more complex than organising a mortgage at home. Lending criteria and eligibility in general differ significantly from one lender to the next, as do interest rates and borrowing costs.

For most, it’s a case of hiring a local lawyer and/or real estate expert to represent them in their absence. All of which means further costs and complications. It can also be a time-consuming process, which isn’t ideal when the intention is to secure a bargain property while the opportunity exists.

Bridging loans to purchase overseas homes

This is perhaps why bridging loans have become a popular choice among Brits buying abroad. With so many quality properties being sold for exceptionally low prices, it’s very much a case of first come, first served. Procrastinating for as little as a few days could see the property of your dreams being snapped up by someone else.

Traditional mortgages (at home and abroad) have a tendency to take several weeks to arrange. With a bridging loan, the money needed to pay for a property outright can be accessed in as little as three days. Just as long as the applicant has sufficient collateral to cover the cost of the loan, the application process can be surprisingly simple.

Of course, the key proviso with a bridging loan is ensuring you have a valid exit strategy. That being, a plan for repaying the loan in full a few months down the line Bridging loans are therefore unsuitable for buyers looking to spread the costs of their property purchase over several years, but they can be uniquely cost-effective for those able to repay more promptly.

Independent advice

With such a broad range of options available for financing an international property purchase, it’s important to seek independent advice at the earliest possible stage. Consider the available options, establish your budget, and conduct a whole-of-market search in order to ensure you get the best possible deal from a reputable lender.

It’s fair to say that bridging loans landed in the United Kingdom with an initially shaky reputation. For the most part, short-term loans in general have always been viewed with a certain amount of scepticism. Particularly in instances where non-payment leads to heavy penalties in a relatively short period of time.

Today, UK borrowers and financial watchdogs alike are beginning to view bridging loans in an entirely different way. Whichever way you look at it, bridging finance has the potential to provide an invaluable lifeline in a time-critical situation. Nevertheless, this doesn’t mean that bridging loans are always the most appropriate or economical option.

They are one of hundreds of unique financial products available on the UK market, with their fair share of advantages and disadvantages.

Considering all available options

Accessing the most appropriate financial products for any given requirement means considering as many options as possible. The easiest way of doing so is to contact an independent broker, who can compare the market in its entirety on behalf of the borrower.

Should it be decided that a bridging loan is the way to go, it’s important to consider all the advantages and disadvantages ahead of time. A bridging loan could prove invaluable when time is a factor, but it should never be applied for without careful consideration.

The advantages of bridging loans

As far as advocates are concerned, the most appealing advantages of bridging loans are as follows:

• Bridging loan applications can be completed, processed, and finalised in a matter of hours. Across the board, bridging finance is exponentially quicker and easier to access than a comparable high-street loan.
• Borrowers have the option of repaying the loan in its entirety in one lump sum on a predetermined date. For some, this is preferable to the usual monthly instalment approach.
• Lenders often demonstrate a fair amount of flexibility with the collateral they are willing to accept to cover the cost of the loan. This makes bridging finance ideal for property refurbishments and redevelopment projects.
• Poor credit applicants are not necessarily counted out of the running, as eligibility is usually determined exclusively on the basis of collateral. Even if you have an imperfect credit history, you can still qualify for a bridging loan in no time.
• Bridging finance can be great for taking advantage of time-limited investment opportunities, such as purchasing properties at auction.

The disadvantages of bridging loans

As for the downsides, the following should be taken into account before applying for a bridging loan:

• There are typically no allowances for repaying bridging loans over longer periods. Loan terms usually last 6 to 24 months, maximum.
• Penalties and additional interest charges can be particularly steep in the case of non-repayment of the loan. It’s therefore important to carefully consider your financial status before applying.
• As bridging loans are secured loans, your property may be at risk of repossession if you fail to meet your repayment obligations as specified in the contract.

In terms of reputation, there will always be those who favour one type of credit over another. Nevertheless, evidence would seem to suggest that more businesses and everyday borrowers than ever before are considering or applying for bridging loans.

At the right time and with the help of a responsible lender, bridging loans can be surprisingly affordable. They can also be the only realistic option on the table in time-critical situations. If you simply cannot sit around for days or weeks on end for a bank to make up its mind, bridging finance could be the answer.

You’ll find the concept of the second charge explained in relentless detail by countless financial specialists online. Nevertheless, finding a definition that’s not disastrously overcomplicated is something entirely different.

So for those who’ve been wondering what second-charge loans and mortgages are all about, you’ll find a concise overview and explanation detailed below:

What Is a Second Charge Loan?

A second-charge loan, aka second-charge mortgage, provides homeowners with the opportunity to raise capital by using their property as security. An alternative to a personal loan or remortgage, a second charge loan is simply a second mortgage taken out alongside a primary mortgage.

Remortgaging is different in that a remortgage deal enables the borrowers to pay off their prime remortgage in full, switch to a new mortgage deal (often with a new lender), and continue to pay one mortgage as before. The benefit typically is lower monthly repayments or lower overall borrowing costs. Remortgaging is also an option for raising extra cash to fund property development works, extensions, renovations, and so on.

While there are similarities between the two, second-charge mortgages are not the same as remortgage products. Primarily, a remortgage deal simply converts your current mortgage into a different type of mortgage, while taking out a second charge mortgage means having two separate mortgages secured on your home.

The two products also differ in terms of eligibility. When taking out an initial mortgage or remortgageing a property, eligibility is determined by the applicant’s credit rating, proof of income, financial status, and often the size of the deposit they can pull together. With a second-charge mortgage, applications are typically scrutinised exclusively based on the borrower’s equity. Or, in other words, the value tied up in their home.

It may still be necessary to provide evidence of your ability to repay the loan as agreed, but credit checks and extensive financial background checks are usually unnecessary.

It’s important to be aware of the fact that ‘equity’ in this instance refers to how much of the borrower’s property they own outright at the time of the application. In a working example, the applicant has a £300,000 mortgage on their current property and has so far repaid £125,000. This would mean they have £125,000 equity, which could be used to secure a second charge mortgage.

Again, by general eligibility.

What’s particularly useful about a second-charge mortgage is that loans are often available for as little as £1,000. Hence, there’s no requirement to borrow more than you need if you’re looking to tackle a relatively minor project.

Should I apply for a second-charge mortgage?

A second-charge mortgage is one example of the countless secured loans available for homeowners. Even if you are perfectly eligible for a second-charge mortgage, it may be useful to first consider the alternative options available.

For example, while it’s possible to borrow as little as £1,000 by way of a second-charge mortgage, an unsecured personal loan could be more affordable for any sum lower than £10,000. Likewise, if you plan to fund a short-term project and will have the means to repay the loan balance within a matter of months, you could save time and money with a bridging loan.

Particularly where poor credit applications are concerned, it’s worth comparing all available options both on and off the UK High Street. Compare the market in full under the supervision of an independent broker to see which secured (and unsecured) products best suit your needs.

At a growing pace, bridging finance is becoming a force to be reckoned with in the UK’s specialist lending market. Providing rapid access to significant sums of cash for just about any purpose, bridging loans take convenience, flexibility, and accessibility to an entirely higher level.

But even at this stage, the true versatility of bridging finance isn’t what you’d call common knowledge. You may associate bridging loans with fast-paced property purchases, but how about a bridging loan for VAT?

For commercial property investors and developers, an affordable bridging loan to pay VAT can provide a welcome lifeline at a critical juncture.

What is a bridging loan for VAT?

As you’ve probably figured out by now, bridging loans for VAT are short-term loans that can be used to pay the VAT on a commercial property purchase. As things stand right now, the vast majority of commercial property purchases (where the property is less than three years old) require a 20% VAT payment. The VAT must be paid on top of the price of the property at the time of its purchase, which can significantly elevate the costs of the transaction.

The more expensive the property, the greater the VAT outlay for the buyer.

Of course, commercial property buyers go on to claim this VAT back from HMRC at a later date. The problem is that, depending on the specifics of the case and application volumes at the time, it can take as long as three months for refunds to be actioned. During which time, the investor could be left somewhat out of pocket.

Loans and specialist credit facilities in general are frequently used by investors to cover VAT costs, but none have proven quite as flexible or affordable as the bridging loan.

How a VAT-bridging loan works

As with all bridging loans, a VAT bridging loan is offered as a short-term credit facility for a specific purpose. In this instance, the borrower is able to apply for a minimum of, say, £50,000 with no upper limits, secured on their existing property or qualifying assets. Applications can be processed and funds delivered in as little as five working days, after which the full balance is repaid on an agreed date. Bridging loans can be arranged over terms of anything from a few days to 18 months, in accordance with the preferences of the borrower.

The lender makes the money available as quickly as possible, the borrower uses it to pay the VAT, and the property purchase goes ahead. When the VAT is refunded by HMRC, the funds are used to repay the loan in full, along with any additional borrowing costs incurred. The quicker the loan is repaid, the lower the overall borrowing costs and the simpler the transaction in general.

Affordable short-term VAT loans

Some of the UK’s leading bridging specialists offer short-term loans with rates of interest as low as 0.5% per month. All with minimal additional borrowing costs, arrangement fees, and general levies. Just as long as the balance is repaid in accordance with the loan agreement, bridging finance can be uniquely cost-effective.

Along with near-immediate access to the funds required, a key benefit of bridging finance is the elimination of credit checks. If the applicant is able to provide sufficient collateral to cover the loan, there’s no requirement to undergo a credit check or provide proof of income. No deposits, no delays, and no unnecessary complications, ideal for covering VAT costs when time is a factor.

Just be sure to consult with an independent broker before penning your application, which will help ensure you find the best deal from an extensive panel of specialist lenders.