Best Commercial Finance

Most people will have heard of the term bridging finance or bridging loan, but unless they have actually needed to apply for one, they may not be completely clear on what this type of loan is or what it is used for. An extremely simple definition would be that bridging finance is a type of loan that covers the purchase price of a new property, whilst awaiting the funds from the sale of a currently owned property. There are two distinctly different types of bridging loan, the closed bridge and the open bridge, let’s take a close look at both type.

The simplest form of bridging finance, and the type which lenders will often be more comfortable providing, is the closed bridge. A closed bridging finance is used to acquire the funds to purchase a new property, when the existing property that is being sold has gone past the exchange of contracts stage. Lenders look upon this form of bridging finance as relatively low risk, as it is not often that a property deal falls flat once contacts have been exchanged.

The second form of bridging finance is the open bridge, a much more complex form of borrowing. An open bridge is required when a buyer wishes to purchase a new property, but has yet to sell their existing property, or in more extreme cases may have yet to place the property on the market. Lenders really do see this as a risky type of loan, and the interest rate offered will often reflect this. An application for open bridging finance will need to be accompanied with full details of the offer you have made on the property you wish to purchase, and a valid exit strategy will need to be in place, in case the loan should come to full term without the existing property being sold.

Borrowers often see bridging finance as a last resort form of funding for a new property acquisition, and in the past this has been somewhat true. However, recently several commercial mortgage brokers have managed to design and bring to market some fresh new bridging finance products, which can sometimes supply up to 100% of the purchase cost of the new property, meaning bridging finance can be used without worrying about making up the short term repayments whilst waiting to sell the existing property.

Anyone who is considering bridging finance should really consider speaking to a professional commercial finance broker, a good broker will be able to assess your situation and advise you upon the best type of bridging finance to suit you individual needs. Additionally, a finance broker will be able to help you prepare the application itself, along with the documentation that will be required to accompany it. Acting as your contact point between yourself and the lenders, they will be able to simplify and streamline the entire application process, gaining you the best bridging finance available in the shortest time.

Unlike personal finance, availing yourself of the best commercial finance is neither straightforward nor quick. If you approach your application for the best commercial finance expecting it to be a similar process to applying for personal finance you will be heading for a shock.

The major fundamental difference between obtaining the best commercial finance possible and obtaining a similar personal finance product is that commercial lenders operate a vastly different selection criteria than personal lenders. If you do not fully understand these criteria, it is highly unlikely that your application will be accepted.

When trying to find the best commercial finance available to you, each lender will require that you submit a whole mountain of supporting documentation with your application. You will definitely be required to provide a set of audited business accounts, along with a properly prepared business plan demonstrating the strategic gain in acquiring the finance and how the business will be capable of making repayments. You may also be required to divulge shareholder information along with details of all company directors and officials. To make matters far worse, each individual lender may require this documentation to be produced and presented in a separate format, meaning you would need to re-produce the supporting documents for each lender you approached in order to find the best commercial finance possible.

For a moment, let us assume that you have the time and expertise to produce this documentation yourself; you will then need to search the lending market to find the best commercial finance that would suit your requirements most fully. Once you had drawn up a list of lenders and products, you would then need to approach each one and begin the application process. Of course, this is a logistical nightmare; juggling several finance applications simultaneously would be confusing and complicated.

So what can be done to make things easier? Is there no other way to approach the search for the best commercial finance product for your business? Luckily there are professional brokers who specialise in commercial finance, and hiring such a broker to help you with the application process makes perfect sense. Every broker will have access to a far greater range of lenders and products; they will be able to correlate your requirements with the products that are available. Once you have discussed the options with them, they will assist you in preparing all of the documentation required to accompany the application. They are then free to start the application process with multiple lenders in one batch, without having to approach each one individually. They will keep you informed as to the status of each application and help you resolve any problems that occur during your search for the best commercial finance option available to you.

In short, hiring a professional commercial mortgage broker is the only sensible way to find the best commercial finance for your business.

Bridging finance is used as a short term loan to bridge the gap when a property currently owned is still awaiting completion of the sale, but the owner wishes to purchase their new property immediately. Usually bridging finance will be offered at a slightly higher interest rate than normal borrowing, and will be of a fixed term.

Using bridging finance can be an expensive option; careful consideration of the costs involved should take place before making a commitment. Sometimes bridging finance will be unavoidable, in these situations the borrower will be facing losing the chance of procuring their new property if they wait for the completed sale of their old property. In times of a slackening property market, bridging finance can be the only option to make sure you can buy the new property you want within a decent amount of time.

What Kinds of Bridging Finance Are There?
Bridging finance comes in two distinctly different flavours. Borrowers who have already exchanged contracts on their existing property will be offered what is known as a “closed” bridge. It is not often that a property deal will turn sour once the exchange of contracts has taken place, so lenders see this as a fairly low risk form of loan. The second form of bridging finance is offered to people who have yet to sell their existing property, and is known as an “open” bridge, in this situation, the borrower may not have even placed their current property on the market, but wish to purchase their new one as soon as they can. If you are considering open bridging finance, you should be aware that lenders will want to see a lot of equity in your existing property, along with your plans for making repayments, and ensure that you have a plan in place should you run too full term without selling your current property.

If a borrower approaches a lender for open bridging finance, the lender is almost definitely going to want to see the actual details of the mortgage offer you have made on your target property. They will also more than likely require full details about the property, and require that you produce proof that your current property is being actively sold on the market. Additionally they will need you to prove that you are capable of making the repayments, and what kind of exit strategy you have in place should you reach full term without selling your property.

Bridging finance will almost always carry a higher rate of interest than a standard loan, and there will usually be some form of arrangement or setup fee involved. In certain cases you may be offered a choice of lower interest rate and increased fee, or lower fee and increased interest rate, deciding which would be best for you will depend upon how long you feel it is going to take to sell your existing property.

Bridging finance is often the ideal solution to a short term cashflow problem, taking professional advice from a commercial mortgage broker before talking up any form of bridging finance is recommended.

If you are looking for an effective method of bridging the financial gap between the purchase of a new home and the sale of your existing home, quick bridging loans could be the answer.  The period in-between sales can be very uncertain and frustrating; it could even lead you to losing your new dream home.  A bridging loan is a perfect way of raising short term finances; the loan is repaid when the sale of your existing house goes through.  Typical lengths of bridging loans are between six months and three years, although other periods can be negotiated with your lender.

In some cases people enquire about quick bridging loans because they need to purchase a new property within a short space of time or all other financial options have been closed to them.  There are companies out there, especially on the web that will provide their customers with very quick bridging loans with minimal paperwork and an almost instant answer.

It must be noted that the interest rate placed upon a bridging loan is much higher in comparison to personal loans and mortgages.  This is because they are regarded as high risk investments, there is no guarantee that the sale of the person’s existing house will go through which could result in the borrower having many difficulties meeting the repayment criteria’s.  Bridging loans are secured however, this means that they will need some sort of collateral to protect them against the borrower from defaulting on a payment, the collateral used is usually a property.  The lender will have a legal right over the property until the full bridging loan amount has been repaid.  The worst case scenario is if the borrower is completely unable or unwilling to repay the loan, the lender has a legal right to repossess the house.

There are many companies who can provide quick bridging loans, it is important however to carry out extensive research in order to find the right bridging loan for your needs and situation, don’t rush too much or you will end up with a package that could leave you out of pocket.  Also you will need to make sure that there is a very strong likelihood of your existing property being sold, or that you have adequate future repayment plans in position.  Bridging loans are an excellent way of helping with those short term gaps in finances; they enable you to move on into your dream house without having to put anything on hold.

Best Commercial Finance are commercial mortgage brokers specialising in quick bridging loans.

Commercial mortgages may be obtained for buying property to be used for your business.  However they can also be used for raising capital for your business to be used in all sorts of ways – expanding, buying new equipment, or employing more people.  They are secured on the assets of your business – usually either bricks and mortar, or equipment.

If you are a sole trader you will be personally liable for the repayment of the commercial mortgage, and your liability can extend to your personal property as well.  If you are a limited company, your personal assets can still be at risk if you have provided a personal guarantee.

Unlike a business start-up loan, which is usually a short-term loan, a commercial mortgage can last for 25-30 years.

The interest payments on a commercial mortgage are generally allowed to be set against tax by Her Majesty’s Revenue and Customs.  However you must always check with your accountant.  You can find yourself in trouble if HMRC considers that you have used the funds for a non-approved purpose.

In cases where commercial mortgages are used to raise extra capital for a business, rather than for buying property, lenders may offer to refinance a current mortgage.  They may increase the amount of the current mortgage, or set up an equity line whereby you can raise the money on the equity you have in your business.

As with any mortgage, it helps to have good credit, and of course the better the collateral the more straightforward the process will be.  However, if you lack a perfect credit record, there are certainly lenders who will provide you with a loan – though it may be at higher rates.  And if your collateral is not seen as sufficient in itself to secure the loan, you could be asked to provide further security such as your private home.

By far the best person to give you advice on commercial mortgages is a commercial mortgage broker.  The broker can find a wide range of lenders and highly competitive deals.  You will find that there is no reason to be nervous about commercial mortgages – they are there to give you the best possible start for your business.