Unlocking your value - by Tomer Aboody

Monday, 7 September 2015
Since the economic downturn, many property investors and business owners have found themselves “asset rich but cash poor”, with the bulk of their wealth tied up in assets instead of cash savings. Although the UK housing market has enjoyed continued strong performance, mainstream lenders have implemented tougher affordability restrictions, which has impacted property investors and business owners who have struggled to release equity from their assets after being faced with more hoops to jump through. This trend is set to continue in the UK, especially with regulations on buy-to-let mortgages currently being under review.

Bridging finance can be a real solution for those who are asset rich but lack liquidity, providing a quick injection of funding in order to finance acquisitions and expansions.

One of the main benefits of bridging finance is the speed with which borrowers can access funds. Some bridging finance lenders offer loans on a non-status basis, meaning they don’t require evidence of trading history, accounts or proof of income before funds are released. Instead, the financing is based on the property the loan is secured against and the client’s future plans, an ideal solution for those looking to instantly unlock the capital from their assets.

MTF is one such lender. We recently helped a client who required £1,000,000 to expand his business abroad. Funds were required very quickly so that the client could take advantage of a great business opportunity.

The client was a main shareholder in a listed company and owned a property worth £2.25 million with an existing first charge mortgage of £460,000. However, the client’s mortgage lender refused to provide further finance due to “MMR affordability issues”.

As non-status lenders, MTF was not concerned with the client’s income, focusing only on the quality of the property that would be used as security for the advance. MTF was therefore able to secure a second charge bridging loan for the client on an 18-month term at 66% loan-to-value (LTV) at open market value.

As a result of this practical, commonsense approach, the client was able to expand his business abroad, using the funds to pay for the initial operating costs. The 18-month term also gave the client plenty of time to arrange and secure a business loan with a bank, in turn settling the bridging loan.

 MTF’s non-status approach is equally helpful when dealing with larger, high net worth applicants who occasionally have difficulty obtaining a loan as a result of the tax efficient structures employed by them. Such applicants often struggle to demonstrate their UK taxable income to a lender, which can create significant barriers when trying to secure a loan.

Individuals or off-shore investment vehicles, whose income streams can be erratic or are derived from multiple sources, fall into an unconventional space and fail to tick the boxes required by some lenders. MTF regularly assists clients in refinancing or releasing equity from properties where the holding companies are based in the British Virgin Islands, Gibraltar and Guernsey, thereby ensuring that clients do not miss out on great business opportunities due to a lack of finance.