April 2015 - First 4 Commercial

What’s Your Exit Strategy?

An exit strategy – a method of ensuring a loan can be repaid – is often cited as an essential aspect of the bridging loan process, but what’s your exit route? If you have arranged a closed bridging loan where the completion date for the sale of the property has already been determined, your exit strategy is simply the sale itself. You can be sure that the buyer has the necessary funds in place to buy, and that you’ll have the resources to pay the lender.

Things get a little more complicated when it comes to open bridging loans. In this scenario, no completion date for the purchase has been set, and there may not even have been any offers made on the property. Sales can and do fall through, which can leave some homeowners struggling to pay off the loan as quickly as they anticipated – there’s no solid exit plan.

Attractive Rates

In the case of open bridging loans, your choice of loan could be a significant part of your exit strategy. Bridging loans are traditionally known for their high interest rates as they’re considered to be a very short term solution, but as the industry is growing and financing is being accessed in this manner by increasing numbers, many banks are now in a position to be able to offer more attractive rates. First4Commercial, for example, work with lenders who are able to offer rates as little as 0.65 percent per month.

Choosing a loan wisely ensures you’re able to continue making repayments on an open bridging loan, even if things don’t quite go to plan. Having a solid exit strategy in place – such as the sale of a property – is, of course, essential, but this plan can be complemented by thinking carefully about the type of bridging loan you apply for.



Refurbish-to-Let: The New Trend Amongst HMO Landlords

As buy-to-let mortgage rates are decreasing, more and more landlords are rapidly expanding their portfolios and are venturing into the HMO, or ‘house in multiple occupation’ market. Recent reports suggest that gross yields for HMO properties have, for the first time, exceeded the 10 percent mark, and HMOs are now becoming a hot topic.

However, bigger properties typically mean higher costs, and savvy landlords are beginning to show a trend for moving away from the traditional buy-to-let scenario, and are instead focusing on refurbish-to-let – the act of purchasing HMO-ready properties (or properties that can be transformed into HMO homes) which are in need of renovations for low cost, and refurbishing to yield a greater rental value.

Securing the Right Financial Deal

A common challenge faced by refurbish-to-let landlords, however, is that it can be difficult to secure a standard buy-to-let mortgage for a rundown property – lenders want to know that they’re going to see returns. While some specialist lenders do have dedicated financial products in place to cover these scenarios, interest rates have typically deterred landlords from exploring the opportunities any further.

The good news for HMO landlords, and for buy-to-let landlords looking to expand their portfolio, is that many banks seem to be open to the idea of working with HMO landlords. Recently, a major high street bank confirmed that they were ‘considering introducing a hybrid loan’ that would combine a buy-to-let mortgage with another financial product that would offer landlords greater flexibility in terms of the properties they purchase.



Insurance Tips for Business Owners

Recent studies suggest that many small businesses operating in the UK do not have adequate commercial insurance in place, putting them, their business, and their property at risk. 72 percent of freelancers who operate as a business, for example, do not have insurance – including key-man cover – despite most understanding why this type of insurance is essential.

Business insurance is vital for anyone operating as a business in the UK. Here are some top tips to help you secure insurance that covers your needs:

Use a Broker or Agent

Commercial insurance can be a complex industry, particularly for first time business owners. In many cases, there will be terms and conditions within the lease that you will need to satisfy in terms of insurance, which is why using a third party company such as First4Commercial to negotiate policy wordings and ensure you’re meeting your obligations is a vital step.

Don’t Skimp

Cheaper rates are more attractive, but they can be indicators of a product that isn’t as comprehensive as it needs to be, with many policies missing out on important factors such as risk management services. As the experts say, you should ‘choose your insurance adviser as you would any other professional’ – taking into account both cost and level of service.

Stick with Reputable Companies

At First4Commercial, we partner with some of the biggest and most renowned names in the insurance industry to provide you with a high quality financial product that meets your commercial needs and ensures you comply with current legislation regarding your responsibility to arrange suitable business cover – both building and contents – for your property.



Attractive Interest Rates Changing the Nature of Bridging Loans

Across the sector, interest rates for financial lending are continuing to drop. The introduction of more attractive rates is hitting the headlines as it’s allowing more and more people to access financial assistance, but there’s another, lesser known effect that lower interest rates are having on the market – they’re changing the nature of some types of financial products.

Giving Borrowers More Breathing Space

The effect is most notably seen within the bridging loan industry. Traditionally, bridging loans have been viewed as very short term arrangements, simply ‘bridging the gap’ between house purchase and house sale, but recent statistics are suggesting that bridging loans have evolved and are now no longer the short term solution they once were.

Reports suggest that the average loan term for modern bridging loans is now 11 months. With interest rates as low as 0.65 percent per month via First4Commercial, borrowers are no longer in a rush to repay quickly, and this change in nature has actually been praised by professionals who claim that these lower interest rates are offering young people more breathing space when it comes to securing mainstream financial products such as mortgages.

However, the question that arises from this change in nature is whether these new, lengthier loans can really be categorised under the ‘bridging loan’ sector. By definition, bridging loans ‘bridge the gap’, so are we seeing the introduction of a new breed of specialist lending? If interest rates continue to decline and affect the nature of loans in such significant ways, it is expected that the industry will launch a new range of specialist financial products to meet demand.


The History of P2P

Peer-to-Peer (P2P) lending is now considered to be one of the most sensible solutions for both individuals and commercial businesses looking for small to medium sized loans without having to apply to a traditional high street bank. There are a number of people and companies who would benefit from P2P lending over a traditional personal or commercial loans, including those with poor credit histories, or businesses with an inability to demonstrate internal accounts.


Of course, the concept of P2P lending has been around since the beginning of time. Perhaps the earliest example of record comes from ancient Mesopotamia were ‘quasi-banking’ was a common activity. While quasi-banking has come to have many different meanings, in this sense it was used to refer to the act of banking without the formal agreements in place. It is only in recent years that we’ve come to know this sort of lending as peer-to-peer lending, which is why many borrowers believe P2P to be a relatively new and revolutionary idea.

Often cited as the world’s first P2P company, Zopa was launched in the UK in 2005, followed by the country’s first commercial-focused P2P lender, Funding Circle, in 2010. Since then, many other P2P companies have emerged, each offering new aspects that reduce risk and make P2P much more similar to traditional banks in terms of lending. RateSetter, for example, utilises a provision fund for risk management, while Lending Works has insurance policies in place.

The UK was actually instrumental in developing the concept of modern P2P lending, leading the way for other countries around the world to follow suit. The USA jumped on the bandwagon in 2006, while New Zealand, Sweden, and the Emirates launched their own ventures in 2014. Today, P2P lending is a multi-million pound industry, and one that can prove advantageous for many individuals and businesses looking for small, short term loans.


Why It’s OK to Consider Smaller Loans

Smaller, short term loans – typically amounts of less than £5,000 and borrowed for a period of up to 3 months – are traditionally thought of as being quite illogical from the borrower’s perspective. These smaller loans often comes with much higher interest rates than their larger counterparts, with some high street banks charging up to 25 percent APR – an interest rate that would see borrowers repaying more than £2000 more on a £3000 loan.

Attracting New Borrowers

The reason for the higher APRs is simple – lenders are constantly looking for ways to attract borrowers wanting greater finance as it’s good for profits, and are focusing less on small, short term loans that don’t generate as much revenue. As a result, APRs for smaller loans are not always very competitive. However, is all that about to change? Is it now OK for borrowers to consider taking small personal loans?

Drops in APR Rates

With the rise and unrivalled successes of peer-to-peer lending in the UK, more and more banks are wanting a piece of the action, and we’re starting to see significant changes in interest rates for smaller loans. Tesco Bank, for example, dropped their small loan APR by nearly 4 percent in 2015, while Sainsbury’s Bank is offering reduced interest rates for those with a loyalty card. It is expected that more banks will follow suit to compete with peer-to-peer lending companies.

Although there is still no standard interest rate for loans under £5000, with APRs varying considerably, there has been a very clear trend recently for reduced rates which is expected to continue. For borrowers requiring minimal financing, it’s now OK to consider a smaller loan.


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