Loan Broker Update: Difficult loan, funding & capital raising options

Difficult loan, funding and capital raising options

It’s fair to say that most loan enquiries come to us for the straight forward reasons we all know – high ERC’s, retaining a beneficial rate on the current mortgage or problems remortgaging due to income and adverse credit. However, we are increasingly seeing new scenarios and solutions which often only appear following more detailed questioning and the team here is briefed to, where possible, gain a deeper understanding of your client’s requirements and options.

A classic example includes brokers asking what we can offer on a self certification because the current accounts don’t stack up – there are so many other options to consider first – loan purpose, projections, sole trader or limited company, other security and repayment vehicles etc.

Understanding Market Rates & Repayment Terms

Have a look at these recent scenarios of loans which brokers nearly failed to satisfy

Loans for business purposes – not necessarily bad news. There is a perception that borrowing for business loans is a real no no. For some secured lenders this is true, but in other cases it can open up more options, especially if lending to limited companies. We have completed a number of cases where the company needed a cash injection to start re-growing.

Historic income was poor but the lender relied totally on business projections taking a first, second of even third charge on the residential property as security. Other shorter term loans can also be an option on an interest only basis or a bridging loan if there is a viable exit. None of these are the cheapest methods of funding but can be the only option available. (Don’t forget to ask about personal pension arrangements as this can also provide an even better solution)

Key Criteria & Application Guidance

Poor accounts doesn’t automatically equal self cert. Here’s an example of self employed clients who had poor recent accounts but latest trading was now on the up. This is not necessarily a self cert and options are available (often with low rates) using bank statements or income projections. In some cases bridging loans have been used to fund business expansion with a remortgage (based on the coming years accounts) providing the exit.

Lending Considerations & Next Steps

No equity – no income – still options. Yesterday I dealt with an enquiry where the applicant had started a company and invested his savings. The business was coming good but the cash flow had not yet come on stream and he needed further investment and money to live on. With no equity, no consistent income yet and a divorce settlement to deal with, he was short of options. However, having questioned his pension arrangements, he had £75K invested through a SIPP and is now exploring tax planning options to make this money available to his business.

Over retirement age, reduced income and credit problems – a loan is not the only option. A couple in their 60’s, with a small mortgage, had lost most of their income and allowed their credit to fall in to arrears. Whilst we could arrange a consolidation loan to tidy up their credit and reduce their outgoings, this would still put them under pressure. They ultimately went for an equity release solution and paid off their small mortgage, cleared their credit and took some cash in hand. Because income and adverse are not underwriting considerations for equity release, the interest rate was less than half that of the secured loanoption.

Lending Considerations & Next Steps

Raising a purchase deposit. Our clients wanted to raise part of the deposit for their new residential home by taking a second charge loan on their BTL property. The easier solution was a £45K unsecured deposit loan with no set up fees, no valuation costs, no hassle for the tenant and no nasty ERC’s. We also get many enquiries for short term funding to buy or refurbish BTL’s properties with the exit being a remortgage 6 months later. Talk to us about, first, second and third charge bridging, especially our expedite bridge which can be completed within a week of our initial conversation.

Rather than risk boring you with more scenarios, I’ll just add, borrowing to age 80 (and beyond) and interest only are still available and remember we have much higher income multiples available through secured loans.

www.promisemoney.co.uk

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