Bridging finance is helping commercial clients who need ‘real-time solutions’, explains Tomer Aboody, director of MTF
The UK commercial sector has endured some tough times in recent years, with events such as the EU referendum, UK elections, and Donald Trump’s presidency all having their effect on the market.
However, in light of slowing growth in the residential market, investors are seeking out opportunities in the commercial market and demand is continuing to increase. According to the latest data released by HM Revenue & Customs (HMRC), UK commercial property transactions hit a nine-year high, with a total of 127,280 purchases made in 2016/17 – a 6% rise over figures recorded the previous financial year.
Commercial property is becoming more popular with private investors, many of whom are being driven away from the residential buy-to-let market by the increasing regulation and rising taxes.
Auction house Allsop recently announced it had seen three times the number of buy-to-let converts dipping into commercial property since the cuts to mortgage interest relief for residential buy-to-let properties were announced.
Yet, the sector is still greatly underserved by mainstream lenders, mainly because of the risks involved due to the volatility of commercial property prices.
Commercial finance is a multifaceted form of finance; there is not a ‘one size fits all’ approach; each loan must be assessed individually and priced according to the risk. The underwriting process is complex and some lenders can be inflexible in their decisions.
Borrowers seeking commercial finance need more innovative options, tailored to meet their needs and one such source that has become a critical tool to fund this community is bridging finance.
Bridging finance has presented a real-time solution by providing a quick and flexible injection of liquidity to fulfil funding needs. The market is famed for constantly adapting to change and for its product innovation. For example, MTF recently introduced a commercial loan product with a 24-month term, due to demand from our brokers.
A commercial bridging loan can be secured on many property types, including semi-commercial, commercial property, and land. In addition, many income sources ranging from employed, self-employed and sole traders to partnerships and limited companies will be considered. Funds can be used for all existing investments to refinance and improve cashflow, or to purchase businesses such as hotels, land or retail units.
What’s more, because bridging loans are now much cheaper, they are more appropriate for a wider range of borrowers and a wider range of circumstances.
MTF’s bridging loan products are designed to meet the many diverse needs of commercial property investors. 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.
As an example, a property development company needed funds to purchase a £4 million commercial asset based in Peterborough, which they intended to convert into offices.
The developers had a specific completion date and were unable to obtain a commercial mortgage in the timeframe required.
As time was of the essence, our broker partner approached MTF and we provided a £1.8m commercial bridging loan, at 45% LTV based on open market value. Interest was retained at 0.95%, over a 12-month term, with no exit fees or early repayment charges.
In just under three weeks, the clients were able to purchase the commercial investment asset and the 12-month term gave the client plenty of time to refinance with a commercial mortgage.
Over the last 12 months, we have witnessed a renewed appetite to lend in the commercial finance market, with more and more bridging lenders entering into the commercial lending arena. At MTF, we remain committed to offering sensible, flexible, non-status bridging finance loans to commercial property investors.