How to bridge your clients' funding gap with short-term finance

This article was provided by Precise

In the current economic landscape, short-term funding (or bridging) has become a widely accepted solution. For something that may have been considered “more difficult”, expensive to repay and off-putting to many borrowers, the market has grown substantially. Products are now more widely available, and savvy investors are looking to their brokers to know which lenders to turn to.

Short-term lending as a solution

There are many ways short-term lending can be utilised. We highlight some of the most common we see, and how Precise could help.

Standard Bridging

Used by customers where short-term finance is secured on a property that’s in a habitable condition and does not require any improvement work. Examples include:

• Chain break finance
• Cash flow, funding for short-term requirements
• Buying a property at auction
• Meeting tight transaction deadlines
• Landlords who want to make a quick purchase to give additional negotiating power

These applications would be assessed on the total loan amount.

Refurbishment buy to let

Our refurbishment buy to let products can enable clients to purchase properties currently unmortgageable in a way that is both convenient and cost effective. Maybe they want to convert a standard house into an HMO or MUFB.  Or a property has been damaged by fire or water and has no useable kitchen or bathroom. If it’s structurally sound, your customers can use a bridging loan to purchase a property quickly and cheaply, before renovating and increasing the asset value and rental return. They’ll then have a guaranteed exit product at the start, ensuring they won’t need an extended reliance on the bridging loan.

This is suitable for landlords who need to undertake light refurbishment to properties before renting them out. Typically the work needs to be completed in under 12 weeks, and there’s no change to the “footprint” (or intended use) of the property.

The funding can be used to:

• Change the use of a residential property to a small HMO up to six lettable bedrooms (up to 10 bedrooms considered but will require a long form valuation).
• Change the use of a garage to a habitable room
• Undertake works to meet EPC ratings
• Refurb properties purchased at auction requiring works to be acceptable to mortgage purposes
• Refurb in order to maximise rental yield and/or increase value

Tier 1

Refurbishment can be split by its level. Light is where mentioned above, building regulations are required, there’s no change to the overall use/nature of the property and no change to property footprint.

Tier 2

Heavy is where planning permission is required, there is a change to the property footprint and/or a change to the use or overall nature of the property. This can be used for:

• Extensions
• Loft conversions
• Single unit to multi-unit and multi-unit to single unit
• Multi-unit properties currently ‘wind and watertight’ stage that require completion
• Commercial unit conversion to up to four individual units

Precise can release monies in stages where the money is not needed all at once.

Development exit

Our development exit range could be ideal for your property developer customer who needs more time to sell their property or organise long-term finance. Or those who want to release capital to move on to another project. It could also be used by house builders who want to refinance their existing development facility to extend the sales period and/or save money.

Examples include:

• If there are delays in the sale completion or in securing long-term finance
• If a project overruns and funding can’t be extended
• When development project costs have exceeded budget
• To release additional capital from a completed project

Our development exit products include:

• Tier 1 – Up to 60% LTV gross, up to a maximum of six units, no maximum value per unit.
• Tier 2 – Up to 75% LTV gross, no limit on the number of units, no maximum value per unit.

Precise bridging proposition

Whatever your customer’s situation, we could help. Alongside our no-nonsense approach to lending, all Precise bridging products have the following features:

• No exit fees or ERCs.
• Daily interest calculations (minimum interest charge is one month). Only charged interest for the period used.
• Regulated and non-regulated bridging accepted.
• Retained interest for full term of the loan is available for regulated and non-regulated bridging (monthly payment options available for non-regulated bridging but is subject to affordability checks).
• Non-regulated applications for limited companies accepted.
• AVMs are free of charge.
• Stage payments are available on Tier 1 light & Tier 2 heavy refurbishment products.
• BMV are acceptable on a case-by-case basis where we can lend either 75% LTV gross (standard or light refurb) or 90% of the purchase price, whichever is lower.

If you’re anticipating a bridging drive in 2025, take a look at our dedicated page for more information.

Intermediaries only.