Business moves at an incredible pace in the digital age, and opportunities need to be exploited as quickly as possible. The ability to arrange funding for projects without having to wait several weeks for approval is vital fuel for the UK’s economy, and plays a crucial part in keeping businesses flexible and adaptable. Central Bridging are a specialist provider of large scale short term finance for the real estate sector, who enable businesses to exploit advantages as they are presented. Working within the field of bridging finance, Central Bridging are an important part of the UK financial system, which contributes a large portion of the nation’s income.
What is Bridging Finance?
For a property developer, the ability to act quickly and decisively is indispensable. However, the sums of money involved in real estate projects can make it hard to operate solely with capital – an investment of several hundred thousand pounds ties up a large portion of a company’s assets in equity, making it difficult for them to expand their operations. Much better to leverage their existing assets into a large loan, but finance of this sort can take several months to put in place; as any homeowner knows, arranging a mortgage is not an easy process, and for large-scale development projects funding can be even harder to arrange.
Clearly a solution is needed which allows businesses to borrow large amounts of money quickly, which is the problem that bridging finance addresses. Having taken off in the 1960s, bridging finance has become one of the most powerful tools in the real estate sector, and one of the most flexible financial products available to developers. The basic premise is this: a business cannot afford to wait for a long term financial solution to be arranged – they need to act now. They contact a specialist short term finance lender like Central Bridging with their requirements, and arrange for sufficient funding to cover the project costs until long term finance can be arranged. This “bridge loan”, which seals the gap between the project beginning and the commencement of long term finance, is used to pay for operating and setup costs. Once the long term cover has been arranged, the bridging loan is repaid (with interest), and development continues with the finance from their new investors.
This system allows businesses to seize opportunities which would otherwise be unavailable, because it frees them from the constraints of their cash flow. Companies which would otherwise be unable to act are able to take advantage of investment opportunities, without having to tie up large portions of capital – business can move more quickly, and projects can be completed more easily. Of course, this also levels the playing field somewhat; small developers without access to the large sums of capital necessary to begin large development projects can afford to expand, using bridging finance to extend into large, more lucrative projects.
Is Bridging Finance Reliable?
As with any financial product, the most important part of a bridging loan is the circumstances in which it’s made. The concept of a bridging loan in itself is innovative and empowering, and can be a great driver for expansion. However, like any loan, if it’s not approved responsibly it can cause trouble for both lender and borrower alike. Because a bridging loan is a high value, short term loan, it typically attracts a higher rate of interest than a mortgage, even though it’s of a similar value. This represents the increased exposure which the lender has, due to the nature of the investment. If the loan isn’t repaid on time, the interest which accrues can build up very quickly, and can cause the borrower to fall into large amounts of debt very quickly. In a real estate context, bridging loans are often secured against the property which is developed, which means that if the borrower should default then the lender is permitted to repossess and sell the property, with a view to reclaiming their investment.
The implications of defaulting on a bridging loan are severe; this is why it’s so important that anyone considering a financial product of this type consults a responsible, ethical lender.
Ethical Trading within the Bridging Finance Industry
During the property boom of the 1990s and early 2000s, bridging finance became a very popular way to expand a business’ holdings extremely quickly. The seemingly endless climb of property prices meant that developers could be confident of repaying a loan of any size, and lenders were continually betting against the future. This meant that loans were approved when there was little reason to believe that they’d be repaid, simply because the market was so buoyant. Inevitably, though, this period of growth proved unsustainable, and when property prices no longer continued rising exponentially many bridging loans were defaulted on. This helped to cause a major financial crisis, and gave the bridging finance industry a bad name.
However, the fault lies with unscrupulous lenders, not with the product, and bridging finance can be a valuable tool when used properly. To establish consumer confidence in bridging loans once more, several industry bodies were set up to maintain a strict code of conduct and level of quality – the Association of Short Term Lenders (ASTL), the Association of Bridging Professionals (AOBP) and the National Association of Commercial Finance Brokers (NACFB). Together, these organisations act to instil a set of common values in their membership, and work to bring the short term lending community together.
Membership of these organisations demonstrates that a lender adheres to their code of conduct, and plays an active part in the promotion of bridging finance as a safe, trustworthy method of funding. Central Bridging is a member of the NACFB and the ASTL, two of the most prominent and active industry organisations. As a member, they are committed to building consumer confidence through open, honest business practises, and are held accountable by the organisation’s complaints procedures.
Who are Central Bridging?
Central Bridging are a UK based bridging loan broker, who offer fast and flexible finance for a range of different investment. Their loans can be used for any number of different applications, from domestic homeowners wanting to secure a new house, to property developers beginning a new project. Central Bridging has been operating successfully since 2010, and in this time have established a healthy track record of effective and efficient finance. Though the company itself has been active since 2010, the personnel behind it have a wealth of experience stretching back several decades, which allows them to navigate the complex world of fast-moving finance confidently and expertly. In addition to their own expertise, Central Bridging are able to draw on the services of Philip Ross LLC solicitors, a leading London law firm with whom they have a 16-year long working relationship. This combination of financial knowledge and legal prowess means that Central Bridging can arrange loans quickly and efficiently, leaving the competition standing in the dust.
Central Bridging operates on three key principles; flexibility, speed and clarity. These cornerstones define Central Bridging’s activities and the way in which they interact with clients, from first application to completion.
No two lenders are completely alike, and what may suit one perfectly might be completely inappropriate for another. Central Bridging loans are tailored exactly to each client’s needs, which ensures that no-one is left dissatisfied. Unlike a more rigid lender, Central Bridging disregards the checkbox mentality and instead judges each application on its own merits, accommodating the requirements of each borrower.
“If you want to run, we can run”, Central Bridging tells their clients, because it’s clear how essential speed is to a successful business deal. In this area, Central Bridging has a key advantage over many of their competitors; they’re a lender, not a broker, and as such can make all the important decisions in-house. There’s no lengthy liaising back and forth with investors, and a simple yes or no answer can often be given within a week.
Ethical trading is vital to the health of the financial system. If there’s no trust in the financial sector, demand for loans will die off and the economy will suffer as a result. That’s why it’s so important that lenders maintain responsible and ethical business practises, not only for their own good but for the benefit of the industry as a whole. Central Bridging are committed to providing clear, concise information about a borrower’s payment structure, and will always rebate interest if the loan is repaid early.
What do Central Bridging offer?
Bridging finance is a flexible solution, and as such there are very few lenders who try to “do it all”. Instead, lenders take advantage of the multitude of different borrowers out there and tailor the products they offer to suit; by offering specialised solutions, lenders are able to meet the precise requirements of their customers. Since Central Bridging are a lender in their own right, with access to their own funds, they are able to judge the requirements of each client according to their own needs, and respond accordingly; there is no third party to consult.
So what solutions does Central Bridging offer? Although they specialise in secured financial solutions for the commercial sector, they’re also able to tailor their products to meet the needs of clients – here are some of the products which Central Bridging specialise in:
- Auction Purchases
Nowhere is speed more necessary than in an auction purchase. No auction house is willing to wait around for a potential buyer to scrape up funds; once the payment period is up, the property will go back on the market and the buyer will lose their deposit. It’s critical, therefore, to receive approval from a bridging lender quickly, so that funds can be transferred and the property secured in time. Thanks to its status as a lender, Central Bridging loans can be approved in much, much less than the industry average; the latest statistics for bridging loans put the average turnaround time at 29 days. Central Bridging has an average approval time of 8 days, with many loans being approved in less than 7.
- Short Leases
Any leasehold property with a lease of under 80 years becomes increasingly harder to sell; the less time there is left on the lease, the more expensive it is to renew. Many mortgage providers won’t even consider a mortgage for a property with less than 70 years remaining on it, but since properties with short leases are often available at a great price these can be attractive investments for the right developer. The potential profits are great; since a mortgage can’t be obtained for the property, the seller is very restricted in who they can sell to, and will be forced to accept whatever they can get before the lease expires. Once the property is obtained, the lease can be extended – a costly process, but one which invariably adds value to the property. The only difficulty is in securing funds, but Central Bridging offers finance for properties with as little 10 years remaining on the lease. This allows developers to take the opportunity to buy property at a knock-down rate, and although the seller might be accepting a low price for their house, it does give them the option to sell rather than be evicted once the lease expires.
- Large Loans
Central Bridging’s core product range begins with loans of £100,000 and extends up to £3,000,000. However, in exceptional circumstances they’re able to meet requirements for larger projects of up to £10,000,000 – this enables them to provide funds for large-scale development projects such as residential builds or commercial infrastructure. Of course, as part of their commitment to responsible trading Central Bridging only offers these exceptionally large loans when the client has sourced 50% of the investment from other sources.
- Short Term Loans
Central Bridging loans can, in exceptional cases, be offered for terms as short as three months. This fast repayment period allows businesses to “fill the cracks” between funding sources, rather than establishing a full bridge between two finance solutions. Access to large-scale, extra-short-term funding is an invaluable option for businesses, and demonstrates that Central Bridging are indeed able to tailor their products for any requirement.
- Adverse Credit
Central Bridging are a forward-looking lender, and are able to work with clients whose credit history might not be whiter than white. Because they don’t use credit scoring, and because they don’t simply fill in boxes, they’re able to recognise that a negative credit history doesn’t mean that a project isn’t viable. Instead, they’ll work with their clients to establish an exit strategy that’s reasonable and achievable, so that when the time comes to repay both parties will be satisfied with the conclusion. This also extends to complications which arise from Inheritance Tax, Accelerated Payment and Follower notices, and Central Bridging will liaise directly with HMRC to ensure that issues are resolved satisfactorily.
- Expat and Foreign Nationals
For immigrants and expats, it can sometimes be difficult to obtain funding. This is especially frustrating for individuals who are entirely trustworthy and responsible, but are met with a boilerplate “Sorry, we can’t help you” by old-fashioned lenders. Central Bridging is, again, able to create a financial strategy which matches up to the needs of the customers, and enables them to purchase their own property within the UK. In fact, Central Bridging has recently completed several loans with seven-figure totals for foreign nationals.
- Purchase at Undervalue
From a traditional “checklist” perspective, purchasing a property for less than its listed value is a warning sign; this can often make it difficult to engage with sellers who are restructuring their estates or simply hoping for a fast sale. A Central Bridging loan, though, is approved based on the merits of each individual case, and if the lender’s valuation experts are happy with the reasons behind the undervaluation then funding can often be provided.
Bridging Finance for the 21st Century
Though it has its roots in the mid-20th century, bridging finance has shown to be a remarkably flexible and adaptable source of finance for many different applications. The many uses to which it can be put and the benefits it offers make it a vital part of the modern financial industry’s landscape. However, this is a highly competitive industry, and businesses need to be innovative, reliable and fast to outpace the competition.
Central Bridging have the pedigree of many years successful trading in this most competitive of sectors, and the expertise, connections and experience built up through these many successful deals gives them that all-important edge when it comes to keeping clients happy. With the continuing demand for finance showing no signs of slowing down, it seems that bridging loans will become ever-more important – in fact, with the UK Government committing to an enormous new-build programme in the coming years, the real estate finance sector looks set to grow and prosper. Central Bridging have already carved out a reputation as a responsible, reliable and effective provider of finance for development, which positions them perfectly for the future.
Official resources about Central Bridging can be be found here:
Official resources about UK financial regulation:
- National Association of Commercial Finance Brokers (NACFB)
- Association of Bridging Professionals (AOBP)
- The Association Of Short Term Lenders (THEASTL)
- The Financial Conduct Authority (FCA)
- Bank of England Website
- Prudential Regulation Authority
- Financial Conduct Authority
- The Financial Policy Committee
- Financial Services Compensation Scheme
Other Unofficial Bridging Finance Guides
Covering areas of UK financial regulation and aspects of Bridging Finance.
- Alpha Bridging
- Association of Bridging Professionals
- Commercial Banking
- National Association of Commercial Finance Brokers
- Reward Finanace Group
- Short Term Finance
- Taxi Finance
- The Association of Short Term Lenders
- The ASTL
- Watts Commercial
Bridging loan guide by Bridging Directory