March 2015 - First 4 Commercial

Should You Use a Personal Loan to Bridge the Gap?

When looking at combining personal loans with bridging finance, there are two important questions to ask. The first is ‘can I use a personal loan to bridge the gap?’ – the answer is yes, assuming the lender is aware of the intended use and the purpose falls within an accepted category. The second is ‘should I use a personal loan to bridge the gap?’, and this is where things start to get a little trickier.

Rise of Bridging Loans

Surprisingly, for some borrowers, using a personal loan as bridging finance might actually be quite a sensible option. While reports suggest that the average bridging loan in the UK is estimated to be around £450,000 – about the same price as a London property in 2015 – not all buyers require this amount. Those that require less due to personal savings or income may benefit from the advantages that come with lower personal loans, such as greater flexibility in terms of age and income. Assuming a personal loan comes with no early repayment charges – something that is committed to – a short term personal financing could be a suitable solution when buying and selling property in the UK or abroad.

There are, however, two sides to the coin. Lenders who are aware of a personal loan being used for bridging purposes may deem the risk to be higher and could react by setting higher interest rates which could make a personal loan a less cost effective option, particularly for those planning on taking out larger amounts to fully finance a new purchase. Whatever type of loan you think would match your needs, can help.



Financing for Growing Businesses

The good news for the commercial sector is that business lending is consistently on the rise, with not only peer-to-peer lending making a difference, but also traditional banks who are being swayed into approving greater numbers of applications due to the ongoing recovery of the economy and a boosted confidence in continued growth. According to reports, an estimated 60 percent of commercial loans are approved today, compared to 45 percent previously. This is particularly true for small start-up enterprises, but is an unsecured commercial loan also a good choice for larger businesses striving to expand?

A Rise in Asset Based Financing

While unsecured commercial loans can prove to be very beneficial for larger businesses, we are beginning to see a substantial rise in applications for asset-based financing across the country, most notably by larger businesses, and the question is ‘why?’. Asset-based financing (ABF) now accounts for £5.1 billion in the UK – a large jump from the £1 billion back in the early 2000s, and sources suggest that this method of funding is ‘being mainly driven by the need to fund growth plans’.

Quite simply, business owners are constantly looking for a good deal – something that is hugely important at a time when the state of the economy is still not completely understood – and need to respond to economic changes rapidly to minimise financial risk. Unsecured commercial loans, while effective for starting a new business, take more time to secure than ABF, which can be sourced very quickly. Opportunities for growth can be grabbed as they arise, giving expanding businesses a head start on their competitors.



Top Three Considerations When Purchasing A Buy-To-Let

Are you already mentally listing the three as:

  • Do I like the house
  • Will it make me money
  • Can we afford to buy it?

Those are not the three considerations we’re covering here. We’re diving deeper to look get an alternative angle on your buy-to-let decision-making process.

Stick to your Neighbourhood or go Further Afield?

Although it may feel comforting to be just around the corner from your investment property, buying a house near to home may not be the wisest investment decision. Choosing to buy in another area of the country helps spread your investment risk. If you buy in the same neighbourhood, both your properties will be subject to the same price fluctuations, whereas spreading across two locations could stabilize the overall net value of your properties.

Keep in mind though that your costs will increase as you will no longer be on hand to complete any odd-jobs.

2) Be Clear About your Target Customer

Think about the combination of property and customer that you will be most happy with. When you are choosing the area and the type of property, it’s really important to keep in mind, who will be living there. For example, you may find a cheap little flat in a street near a school and a park. There’s a mismatch there between the type of tenants the property attracts and the type of tenants who want to live in that area.

3) Factor in all Costs

When calculating whether it makes sense to buy a particular property remember to factor in all the costs. This includes not only fees but also ongoing maintenance costs and losses incurred when the property isn’t occupied.

Getting finance in place quickly can help you negotiate a better purchase price.


Options Available To Finance Your Business Dreams

Have you found the business of your dreams, but lack the cash to pay for it?

Let’s take a look at your financing options.

The Traditional Route: The Bank

Most small businesses turn to their local bank for a loan. The bank won’t fund the full investment though. They will typically offer around 60% of the value of the business. The rest might come from cash, other investors or from re-mortgaging your home.

To get approved for the loan you will need to prove that both you and your prospective business are a sound investment. The bank will want to see audited accounts for your target business for the last 3 years, realistic revenue projections and cash flow forecasts and a business plan. You’ll also need to provide evidence of your financial situation and skills and experience.

When choosing the right loan for your business, look beyond the initial fees and interest rate and calculate the monthly repayments. You may be wiser to take a longer term loan at a higher rate of interest as this will give lower monthly payments, easing your cashflow.

The Enterprise Finance Guarantee Scheme

These are a form of Government backed loan available to small businesses. Owners incur an additional charge over the interest rate to contribute towards the guarantee the Government has put in place for them.


Angel investors are private individuals with a passion for investing in new ventures. You will need legal advice before approaching any individuals for financing using this route.



Is Buy To Let The Right Investment Vehicle For You?

The logic seems sound. Buy a second house, rent it out, use the payments to repay the mortgage, and in 25 years time you will own a second property outright.

But is a buy-to-let investment really that straightforward, and how can you tell if it’s the right investment for you?

BTL Is Ideal For…

If you like to be able to see what your money is buying and you feel wary of investing in stocks and shares, then a buy-to-let property investment makes sense. And by using a buy-to-let mortgage you can invest money now, that you haven’t earned yet. Whereas traditional savings and investment schemes require you to pay in money you already have, a BTL mortgage lets you borrow the money, invest it, then pay it back over time.

But Beware…

Of course, as with any investment, you need to be aware of the risks and costs. House prices (like stock value) can go down as well as up. Plus there will be ongoing costs associated with agency fees and property maintenance. You will also need a savings cushion or form of financial protection to cover any periods when the property is vacant.

Patience Is Essential

The most important attribute needed in a BTL investor is patience. Don’t pounce on the first property that catches your eye. Patiently search the market for the property that offers the best return. And be aware that once you’ve made your investment, releasing your money is a time-consuming and costly affair. To profit from this arrangement you need to take a long term view.



How A Bridging Loan Can Smooth The Property Purchase Process

Bridging loans can be a quick and easy way to plug a short-term financial hole. But when should you be using one and what are the factors you need to consider before completing the application form?

Bridging The Gap Between Money Out And Money In

A bridging loan is a short-term financing solution. It is typically used when an outgoing payment needs to be made shortly before a debt due to you is paid.

Bridging loans are most commonly used to ease the house-buying process. You may have set your heart on your next home, but not been able to sell your current property. A bridging loan will take the strain until you’ve sold up.

They may also be used when buying a property to renovate and sell on quickly.

Pros And Cons

Bridging loans are typically very easy and quick to arrange. This makes them especially attractive to property developers who wish to buy at auction and need financing put into place rapidly. However, it is important to remember that these are short-term loans only. They typically carry a higher rate of interest than a regular mortgage, so it is important you put long term finance in place as quickly as possible. There will also be some administrative costs and legal fees associated with your bridging loan.

When used to ease a property-purchase the cost of the bridging loan may be offset by negotiating a reduced purchase price as you are no longer dependent on a chain.

Plan Ahead

The key to successfully using a bridging loan is to plan ahead. Remember to factor in the additional costs to your budget and before you take out the loan, get clear on what your exit strategy will be.


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