How bridging finance could help commercial property investors by Tomer Aboody

Monday, 17 July 2017
Commercial bridging loans are on the rise as property investors turn their attention to commercial property as an alternative to buy-to-let investments, encouraged by high yields, long leases, tenancy security and less onerous regulation.

A large number of private investors have been driven away from the residential buy-to-let market by 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.

Investors are looking at a wide array of commercial properties including offices and shops, among many others, as an alternative place to park their capital, and are looking for loans to back these opportunities.

The sector is greatly underserved by mainstream lenders, mainly because of the risks involved due to the volatility of commercial property prices.

It is hard to commoditise the sector and there is no ‘one size fits all’ approach as each loan has to be assessed individually and priced according to the risk. The underwriting process is complex and some lenders can be inflexible in their decisions.

Commercial property investors need more innovative options, tailored to meet their needs; 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 injection of liquidity to fulfil their 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.

mtf’s bridging loan products are designed to meet the many diverse needs of commercial property investors, whether funds are needed to acquire stock, to facilitate a new venture or to provide additional capital to stimulate growth.

What’s more, as a non-status lender, mtf does not require evidence of trading history, accounts or proof of income and does 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 time frame required.

mtf 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 ERCs.

In just under three weeks, the clients purchased the asset and the 12-month term gave the client plenty of time to refinance with a commercial mortgage.

A commercial bridging loan can be secured on many property types, including residential, 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 re-finance and improve cash flow, or to purchase businesses such as hotels, land or retail units.

MTF is a leading bridging finance lender specialising in short term loans including auction finance, bridging loans on both a first and second charge basis, and is recognised throughout the industry for its speed and service.

Established in 2008, the company has won multiple awards including Best Service from a Bridging Finance Provider at the Business Moneyfacts Awards 2017, Best Bridging Finance Provider at the Business Moneyfacts Awards 2016, Service Excellence Award at the Bridging & Commercial Awards 2015 and Best Service from a Bridging Finance Provider at the Business Moneyfacts Awards 2014. It was named ‘Short-term Lender of the Year by the NACFB in 2014.