The number of bridging lenders has increased substantially over the last five years, making Bridging Loans up to around £2m more accessible, and propelling bridging finance from a last resort to a must-have tool in your development arsenal.
But if you’re looking for a large Bridging Loan over the £2m mark, perhaps to finance transitional assets or release equity from a property, the options reduce dramatically and it’s likely you’ll need to look beyond the mainstream lenders.
Before you step into the big bad world of big Bridging Loans, we’ve come up with10 things you need to know. Here’s the first five, and keep your eyes peeled next week for the rest.
- Large Bridging Loans are increasing in popularity
With the right contacts and expertise to negotiate bespoke deals, it’s possible to secure jumbo loans. We recently secured a large Bridging Loan of £25m for an international property investor. He wanted to purchase a new property for £28.5m using his existing property, valued at £19.1m, as joint security for the loan. Borrowing against two ‘trophy’ properties made for a small pool of willing lenders but we managed to overcome a multitude of issues and transact within four weeks, enabling the client to secure the new property. Read the case study here.
- They’re not as expensive as you think
There’s a common misconception, even among experienced property developers, that Bridging Loans, and big ones in particular, are an expensive route to take. The increase in popularity however means there’s more choice of lenders on the market, which ultimately leads to better pricing. And if securing a large Bridging Loan means you can buy the property that’s right for your portfolio at the right price and relatively quickly, it will save you money in the long-term.
- It’s a case of who you know
For large bridging borrowing you need to look beyond the big banks to specialist lenders. The larger the loan, the fewer lenders will be available to you, so do your research and shop around for the highest quality lenders. They can be hard to access, so relationships are more crucial than ever for big bridging finance, as was the case here. Using a broker can not only help you search the breadth of the market, but open the doors to those willing and able to deal with unique developer situations.
- They’re a great tool for development entry
Large Bridging Loans can make development sites you thought were a no-go, a reality. We helped a client looking to purchase a retail unit and offices, with a stub-lease and permitted development rights. He planned to hold the asset for a two-year lease period before converting to residential or re-developing the whole site. The lender required extra reassurance around the anticipated build costs and projected GDV. By working closely with all parties, we managed to secure a large Bridging Loan of £8.4m at 70% LTV, and the lender committed to funding 100% of the budgeted build costs, subject to QS reports and valuations. Read the case study here.
- Development Exit Finance is a form of Bridging Loan
Development Exit Finance is a short-term loan, used to repay outstanding finance against a property development once the project has reached practical completion. It’s a great tool to use if your existing finance is coming to an end and sales won’t be completed in time. Reduced risk means it costs less than Development Finance, it buys time and reduces the need for lowering prices for quick sales, and frees up equity to fund your next project, making it a win-win for developers such as our client in South Devon.
So that’s 5 for now, and we’ll share the remaining next week week. In the meantime, if you’d like to discuss a Large Bridging Loan, please contact us on 0207 486 0184 or via the Contact Form.
September 2019
