Daniel Owen-Parr, commercial sales director at specialist lender Together explains.
The value of applications for bridging finance has risen by 123% in the first quarter of the year compared to the same quarter last year, according to experts.
Industry body, the Association of Short Term Lenders (ASTL) has predicted a robust future for this market after its members reported a 13.9% increase on the previous quarter, with an 11.4% hike in the amount of loans written, and a 45% growth in the size of the overall loan book.
Short term finance, such as bridging loans, have traditionally been used for things like repairing a broken chain when buying houses. However, such finance is increasingly being used by SMEs for a much wider variety of purposes from raising capital for business expansion, to releasing cash flow.
Funding business growth
On the commercial side, short term finance can allow businesses to expand or facilitate an office move, for example.
Recently, we helped a manufacturer expand its business by buying a new site thanks to a £550,000 bridging loan. Concrete product manufacturer Waycon Precast wanted to relocate to a £1.65m 10-acre commercial site near Honiton, Devon and had already secured a £385,000 grant from the South West Growth Fund, to create and protect jobs, but needed additional funding.
The established business had been operating from a rented site more than 50 miles away in Plymouth but the freeholder had won planning permission to build houses there – meaning the manufacturing business would have to find a new home, and had subsequently identified the site in Devon.
We reviewed the case and ensured a quick completion, so the company could move fast to secure the deal; enabling the business to expand and safeguarding more the 40 jobs in the process.
In another deal we helped fund a sympathetic redevelopment project for historic building, The Ship, allowing leading property investors Burrington Estates to realise their vision of breathing new life into this historic building, designed by acclaimed architect Sir Nicholas Grimshaw and once home to the Daily Mail Group.
The impressive property, which spans 116,000 square feet on a 12.36 acre plot, had been empty for two years and was at risk of being demolished when Burrington Estates stepped in with a vision to create a regional business hub. Funding was required to refurbish the property, creating offices for a wide range of businesses over the three floors, with spectacular views.
The client required £2.5m to repay their initial investment and a further £2.3m for the refurbishment. However, the lack of tenants or formal lease agreements made mainstream funding difficult, although there were pre-let agreements with five local businesses.
We reviewed the pre-let agreements, whereby the businesses, which included an established call centre, a café and a leisure operator, had agreed to enter into a lease once the refurbishment was complete. We then instructed a full RICS valuation with a market value for the property established at £8.4m, with anticipated value post-refurbishment at £11m. We agreed the full funding of £4.8m, which was delivered within a month, and the client was able to move forward with the development.
Our common sense approach is what sets Together apart; and in these cases resulted in positive outcomes for the customers, reaffirming our ability to deliver when presented with complex cases.
As we look to the future, we would agree with the ASTL that the outlook for the sector is a positive one and we are looking to work with more SMEs across the country to deliver the fast and flexible finance they need.
For more information visit www.togethermoney.com