Turning SME aspirations into achievements
In his Wealth of Nations, Adam Smith coined the phrase ‘a nation of shopkeepers’ when describing the British. The phrase rings true today. Small and Medium sized enterprises are a critical part of the UK economy, accounting for around 60% of private sector employment and half the annual turnover of all private sector businesses.
However, the restrictive approach to lending from traditional sources continues and has left the SME sector suffering. Business owners need more innovative options, tailored to meet their needs and one such source that has become a critical tool to fund the SME community, is bridging finance.
Bridging finance is one of the most efficient forms of lending and offers practical solutions for both small and large businesses. For example, we recently completed a bridging loan for a client who was looking to raise £150,000 to set up a fashion business.
The client’s mortgage lender wouldn’t agree to a further advance and it was not financially viable to remortgage as the existing mortgage was on a competitive standard variable rate and the client didn’t want to disturb this.
The client owned a buy-to-let property worth £1.25m with an existing first charge of £450,000. We were able to secure a second charge bridge on a 12 month term at 48% LTV.
The client was able set up her fashion business, using the funds to pay for her initial operating costs and the 12 month term gave her plenty of time to arrange and secure a business loan with a bank, in turn settling the bridging loan.
New businesses are born every day; some thrive, others fail but what is critical is that all good ideas, all sound businesses, should be provided the opportunity to turn aspiration into achievement and this is when a bridging loan is able to perfectly demonstrate its place in the market.