B&C Distributor is proud to bring you the best of bridging for the week, straight from the offices of our specialist distributors. If you would like to get in touch with any of the packagers mentioned, please contact us.
This week, Simon Allen of Total Business Finance outlines two cases and the lenders involved in making them a success.
Size can matter
There are a lot of lenders at the moment increasing their maximum loan size and whilst this appears to be a positive thing, there is also the other end of the scale. I appreciate that the work on a loan for £30,000 is the same as £300,000, but enquiries come in various sizes.
It’s a Monday afternoon at 4.30 and an existing client who uses me for his more difficult cases rings up in a panic. He had been promised funding for an option purchase by a private lender attached to a property scheme and this had fallen through. He had until Friday to complete or he would lose the £25k he had spent on refurbishing the property - even though he didn’t own it!
He only wanted £35k and this was below the minimum for most lenders. The urgency was heightened after we had discussed the option agreement and I told him completion was a day earlier. Knowing which lenders would look at this size in the North West helped tremendously and 45 minutes later the loan had been agreed via a phone call with the lender, Bridging Loans Ltd.
The valuation was instructed the same night and was received the following morning with the legal pack sent out by lunch. That’s what bridging is all about - speed and efficiency.
Saving a distressed sale
Development funding had been taken by the client for a conversion of a hotel into five apartments. They were finished and due to the slowdown in the market they hadn’t sold. The lender wanted to renegotiate their loan with high penal rates which would have wiped out the client’s profit.
We received the introduction from the client’s residential broker who had tried to place the deal himself but with no success. The client needed £412k which was 51% LTV. Many lenders treated it as a bridge and had a policy of not refinancing them.
Other lenders were approached and whilst the deal worked with all of them, I wanted to reduce the amount of interest the client would have to pay. Most wanted all 5 units but after gentle persuasion one, United Trust Bank agreed to take only 4 of the 5 units as security.
By splitting the title, one could be remortgaged immediately to reduce the debt and the others could be refinanced after 6 months. This reduced the costs, gave the lender an alternative exit route to the sale of the units and helped the client make a profit from the development. He could have panicked when the existing lender was pressurising him and sold the properties at a discount but this would have caused a loss and also given the impression that they were distressed sales.