March 19, 2020
There are many situations when the need for finance arises, but usually when the high streets banks are unable to assist or provide the funds needed, for a variety of reasons. These can include a bad credit rating, missed mortgage payments, or the applicant is unable to prove their income. In these scenarios, specialist finance can be a game changer for many. This case study highlights how a bridging loan dramatically changed our client’s situation.
Loan: Bridging loan
Loan term: 9 months
The client was a private individual who was introduced to Enterprise Finance by their financial advisor because they knew we would be able to offer a suitable solution that would help them.
The client was a Saudi national, the property was owned by an offshore Limited Company and there were multiple Directors of the Limited Company living in different countries around the world.
The client was looking to raise funds secured against an estate in Berkshire, with a value for £2.2m. The funds were needed to complete development work, which was running behind schedule due to a delay in the client obtaining the necessary planning permission and a subsequent delay in works starting.
The planning permission had then been approved and works had started. The client estimated the work would take 9 months to complete. Once completed the property was to be placed on the market for sale.
Traditional finance was not an option for two reasons. Firstly, the property was not considered habitable by most high street lenders as it was being completely renovated. Secondly, the ownership of the property was not traditional.
Enterprise Finance was able to place this case with a bridging lender who was prepared to loan the client the money on a short-term basis. Enterprise finance arranged a loan of £680,000. This included 9 months’ interest payments.
The benefit of using Enterprise Finance was that we have close relationships with several bridging lenders and know who to go to straight away. This bridging lender took a commercial view on a case and they were able to consider ownership structures outside of the norm.
The advantage of this structure was the client did not have to make any monthly interest payments. As all of the interest would be repaid in the final settlement the lender did not need to assess the client for affordability purposes.
This result was perfect for this client. Being a property developer, he receives large sums of money when developments are completed and sold. As developments do not complete on a regular basis, cash flow can be an issue for people in this industry. The client was able to finish his development, repay the loan and then move on to a longer-term form of finance.