There have been a number of challenges for business in 2018. From economic pressures and ongoing Brexit negotiations to rising interest rates- all of which are set to create further challenges for the SME community in one way or another.
Access to finance, however, continues to be a critical challenge for UK small businesses. There is an ongoing lack of flexibility and for companies trying to react quickly to the new challenges in the market, that makes it hard for them to seize new opportunities.
Small business owners need a wider, more versatile pool of liquidity to draw from that is tailored to meet their needs. One major source of capital available and willing to fund the SME space is bridging finance.
Case in point
As an example, mtf recently completed a bridging loan for clients who were looking to raise funds to invest in their growing retail business.
On the strength of the cash flow from their first retail premises, the clients had been able to obtain a commercial mortgage for a second location. However, an opportunity had suddenly come up to purchase the premises next door. To achieve faster growth, the clients wanted to purchase both premises- expanding their storefront, as well as purchase stock for the new, larger store.
The sellers had a specific completion date which meant the clients needed to move quickly to take advantage of the opportunity and were unable to obtain a commercial mortgage in the time-frame required.
Faced with roughly a fortnight to complete the purchase, the clients needed to act quickly. As time was of the essence, they were immediately introduced to us by one of our long-standing brokers.
On receipt of the enquiry, mtf was able to give an immediate decision, and we issued the offer of loan that day. The clients needed 100% of purchase price, so released equity in their principal residence by way of a second charge to increase funding.
Given that the commercial property and the residential property now needed to be valued, it was imperative that the valuation was undertaken as soon as possible. Therefore, we instructed the valuation at the same time as going to offer. Our team then worked around the clock to ensure all the legal requirements were addressed to ensure everything was ready to be sent to our lawyers as soon the valuation report came in.
In just 12 days, mtf provided a £450,000 bridging loan spread over both assets at 65% LTV, based on the open market value of both assets. Interest was retained at 0.95% per month, over a 12-month term, with no exit fees or ERCs. No personal guarantees were required.
Our loan meant the clients were able to purchase the property by the proposed completion date- capitalising on a fantastic investment for their business. What’s more, the 12-month term gave them plenty of time to pay for the initial operating costs and purchase additional stock. The clients would then work with their broker on the exit by refinancing on the main residence and by taking out a commercial mortgage on the new premises.
The client’s broker later commented:
“This case was difficult initially as the clients had tried to secure their own funding before coming to me. With such a short deadline in which to complete the purchase, I knew I had to place the case with a lender that could perform. mtf was the obvious choice here and whilst the clients had themselves received indicative terms from other lenders at lower rates, I carefully explained that there were aspects of the case that many other lenders would not have understood which would be relevant to this case.
“It was the combination of good advice and robust performance from mtf which made the deal happen with days to spare. The new shop is now open, and we are working through the exit for the clients now.”
mtf’s bridging loan products are designed to meet the many diverse needs of business owners. As a non-status lender, we do not require evidence of trading history, accounts or proof of income, and do not require personal guarantees. This allows us to take a practical, common sense approach to lending.
To find out more, speak a member of our team on 0203 051 2331 or click here to fill out our quick enquiry form.