What changed the banks minds? One thing was the amount of projects they had on their books that were in negative equity, why waste more money on schemes that will make a loss. These loans normally would have been foreclosed but if that happens then the loss has to be included in the accounts, whereas if they are left as they are they can be classed as an asset on the balance sheet. All of the banks have equity shares in house building companies, in fact according to the Sunday Times of 8th January 2012 Lloyds, with their acquisition of HBOS are now the fourth biggest house builder in the country only behind Barratt Homes, Persimmon and Taylor Wimpy.

This on top of the new banking regulation that requires banks to hold more capital and the current view that we are entering Credit Crunch Part 2 have dried up the loans banks are willing to lend. Fortunately there are some alternatives to the High Street Banks; niche private banks are still lending and so are Bridging Loan lenders. The rates that these lenders charge are a lot higher than that that was previously available from their banks but for the right project a decent return can still be generated for the developer. The developer has now to have “some skin in the game”, that is some of their own money invested in the scheme. However 100% build costs are still achievable with a contribution towards the cost of the purchase of the site. In some cases a joint venture could also be set up where the lender funds the whole development costs including land purchase and build costs the resulting profits are then shared 50-50 between the lender and the developer. Although for joint ventures the development has to be in a prime location in the Southeast.

Unfortunately with regards to the High Street Banks that old adage applies that they will only give you an umbrella when the sun is shining.

This brings us to China, whose growth figures for the third quarter of 2011 were 9.1% with a projection of around 8% for the economy in 2012. With these figures and the increase in inflation the outlook for China is not looking rosy. There is a speculative property bubble in the main cities and talks of loans that are held by local governments turning bad.

“China finds $84bn local government debt irregularities” with headlines like this on the BBC this is reminiscent of the events that happened in America pre crunch with talk of a soft property bubble landing. No cross contamination from subprime mortgages and the view that all subprime mortgages cannot fail at once. They said “this time it will be different”.

How will this affect the UK’s economy in 2012? Well, with no solution to the Euro crisis in sight and the chances of getting any agreement with 27 independent countries all looking after their own interests, economical as well as political it does not look good.

As one old communist leader said “this year will be worse than last year, but next year will be even worse than this year”

There is only so much pain the Greeks can put up with caused by cutting wages and cutting jobs. Also there is only so much German money Angela Merkal can persuade the German Government to pay out to the “profligate Greeks”.

The way out of the Euro Crisis, we are told is for cuts in wages and Government spending and a rise in private sector employment thus raising more revenue for the Government in taxation. However with every country in the European Union tackling their crises in the same way, with the backing of the IMF (International Monitory Fund), who is going to buy when all countries are trying to get out of the crises by increasing exports? Where is the buyer of last resort? It used to be us in Europe and the USA. Not anymore, and it will not be China as their economy is based on exporting goods not importing them in bulk from Europe.

However the Crisis is solved, either through the peripheral countries defaulting and leaving the Euro or by the crisis being continually deferred by kicked down the road there is going to be a lot of pain for all of us involved.

So do still go to Greece for your holidays but don’t book or change your Euros just yet. Even the Greeks do not riot during their summer holidays.

The answer to these questions is yes. We are entering a new period of being a nation of renters  as opposed to buying property, this is down to a number of reasons; the lack of mortgages to first time buyers and the amount of deposit required to purchase a property now that large loan to values are not effectively available. Also adding to the BTL boom is that the Government and Local Authorities are not building enough affordable housing and the scheme where developers had to provide affordable homes has hit the buffers as speculative building on large sites is at a record low. All of the above have contributed to the increase in rental income and the amount of people that are chasing suitable properties to rent. Adding to this is the increase in the numbers of lenders that have returned to the BTL mortgage market with over 400 products now available. Therefore with a suitable deposit it is easier to get a BTL mortgage than a residential mortgage.

If you are new to the BTL business and have limited funds it is still possible to build up a portfolio of properties with the minimum of funds. How is this legally possible you may ask in these straightened times? The answer is to use short term financing to purchase Below Market Value properties (BMV) at a discount, keep the property for 6 months and then refinance the property onto a BTL mortgage at the full market value. By doing this you can purchase a property with as little as 10% cash as a deposit and after 6 months when you refinance you can release your deposit with the remortgage funds. Effectively getting you back to where you started but now with the security of a property with approximately 30% equity built in.

Where can short term finance to facilitate property purchases be found? This type of funding is provided by niche lenders who are not generally available to the public. Although the costs can be higher than traditional lenders the rates reflect the speed of the transaction, lending based on open market value as opposed to the purchase price and that the lending is non-status requiring no proof of income. There are a relatively small number of providers of short term finance who all have different lending criteria. Only some lend on open market value and even less will fund 100% of the purchase price.

To guide you through this maze the best option is to use the services of a specialist broker with knowledge in this area. We at Sunrise Commercial Finance will lead you through the application from the first call to completion of the purchase and even assist in arranging refinance to a BTL mortgage.

The High Street Banks have decided that this type of lending is too risky for their current business model. Even loans for developments that are half complete are standing empty after agreed funding has been withdrawn. Where can these developers turn after being left high and dry by their banks? There are still private lenders willing to lend to new and part build schemes usually funding 100% of the build costs. For developers and builders that are fully demoralised and just want out of their half completed project there is the option of selling on the scheme to draw a line under their liability and move on.

Although interest rates are higher from private funders at least they are still lending and are more pragmatic in their lending decisions, basing the decisions on the quality of the scheme, profitability and experience of the developer. Some funders insist that the developer has hands on experience in carrying out similar projects, while others are not so prescriptive, and will accept suitable experienced and a qualified personnel carrying out the supervision on their behalf.

Loans from private funders are non status with no great weight being given to the developers credit history. However in order to repay the development loan once the project is complete, if the developers credit history is poor, then the only exit would be sale of the units as refinance would not be an option.

Are there any solutions for the hard pressed farmer? Fortunately yes, private finance is available to plug the gap left by the High Street Banks with short terms loans secured over farms and farm land. As these loans are non-status the income profile of the borrower is not such an issue as it is with the banks. However a realistic exit strategy has to be in place to repay the loan at the end of the term. Loans can be for up to 4 years and in some circumstances can be for longer. Interest rates are also flexible, generally from 1.25% but if the loan to value (LTV) is low then the interest rate can also be lower. These short term loans are generally on a first charge basis but can be on a second charge basis if there is enough equity in the property or land. However second charge lending is at a higher rate than first charge loans and the LTVs may not be as high.

Short Term Finance Loans are very fast to arrange with most loans available to draw down within 10 working days. Interest payments can be rolled up and settled when the loan is redeemed; this is dependent upon there being sufficient equity in the property. Loans can be used for any legal purpose and as the loan is secured on property there will be no need for elaborate business plans or lengthy descriptions about the use of funds.

Some of the panel of our Short Term Asset lenders have introduced a new product, a Flexible Business Loan, which will provide an alternative to credit cards and overdrafts. Although the interest rates are similar to overdrafts and credit cards the facility is more flexible and simple to understand. The loans are pre agreed and secured on company assets up to an agreed figure.

Key Points of The Business Flexi Loan

• For small businesses, partnerships, corporates and LLPs.
• Maximum Term: – 12 months with automatic renewal subject to the facility being operated satisfactorily
• Amount: From £26,000 to £100,000
• Security required, 1^st or 2^nd charges accepted and other assets considered
• Up to 70% LTV
• Interest Rate: Between 2.5% to 3% per month
• 1.5% set up fee with a minimum of £500
• Draw down and repayment in multiples of £1,000 subject to 2 days notice
• In principle decision within 48 hours
• No End or Early Redemption Fees
• Interest only charged on outstanding balances
• Assists businesses with seasonal cash flow requirements

So instead of wasting your time with unresponsive banks why not try our Business Flexi Loan. Easy to understand and no need for elaborate business plans as the loans are secured on assets. The Business Flexi Loan is especially suitable for businesses whose cash flow fluctuates over the year or where upfront costs are necessary to procure materials with a long lead time before sales.

So don’t just sit there waiting for the bank to get back to you, call us now for more information or a quote.

Another more efficient method of accessing finance is to use a short term loan secured on the value of the auction purchase. Although this may only be up to 70% of the Open Market Value (OMV) there will be some cash to put in to make up the 30% shortfall. However if the property is being purchased Below Market Value (BMV) then it is possible to borrow 70% of the OMV and not the purchase price. Normally lenders who will lend 100% of the purchase price will then deduct fees and interest at draw down, this can leave a shortfall between the net loan and the purchase price. But if you already own your own home or other properties it may be possible to raise money secured on them with Short Term Finance, either on a first or second charge basis.

How are Short Term Loans set up in such a short time when the banks take months? Since the credit crunch banks have been building up their cash reserves and therefore they have less money to lend. The lending they now do is carefully underwritten and some banks manually underwrite all loan requests. This along with bank redundancies has lengthened the time for loans to be agreed and drawn down. Even if you have an Approval In Principle it does not mean the loan will complete, it can be withdrawn at any stage of the process and for any reason. Short Term Loan Funders work in a different mind set with the loan being secured on the property instead of placing so much emphasis on the borrower, but they will need to be satisfied that the exit strategy is realistic.  If the borrower has a poor credit history then if the exit is refinance this would be a problem for the funder as the exit route is unrealistic in the current financial climate.

The application process for Short Term Funding is that once the application has been submitted and terms have been issued, subject to valuation then the valuation is instructed. After the valuation had been carried out and a copy received by the Funder then an offer is issued to the borrower to accept. Then the solicitors carry out the legal process for completion and the monies can be drawn down. The time scale for this process will be normally between 5 and 10 working days. Although this can be shortened if a valuation has already been carried out and the legal process has been started.

We can arrange loans from £1,000 to £1,000,000 secured on valuable assets, for terms from 1 month to 12 months. Suitable acceptable assets include; Jewellery, Gold, Luxury Watches, Fine Art, Antiques, Sculptures, Luxury Cars, Yachts, Speedboats and other high value items. All assets are stored in secured specialist vaults or premises. Rates are very competitive starting from 2.49% per month.  Loans are available up to 70% of the value of jewellery, gold and watches and 50% of the value of cars, yachts, art and antiques.

How does this work?

Applications are submitted and the applicant is contacted directly by the lender to discuss their best options. Once the applicant wants to proceed the assets offered as security will be valued by a specialist valuer. This will be at one of the lenders appointed offices, or by registered post sent direct to the lenders secured valuation centres. For valuables worth £20,000 or more a home visit can be arranged. After valuation you will be made an offer and upon acceptance your money will be paid out. All valuables are then stored in the lenders insured specialist vault and premises. The only checks required are on the applicants proof of identity and proof of residency to satisfy money laundering regulations.

Funds can be used for any legal purposes, holidays, purchasing a bargain where speed is of the essence, to settle personal or business debts, tax and VAT liabilities and to provide monies for the deposit for property purchases.

What are the advantages of using this type of funding?

•    Simple to understand, no complicated underwriting procedures and with the lender having an appetite to lend.
•    All contact with the client is discrete to maintain client confidentiality and anonymity.
•    Adverse credit acceptable.
•    No solicitors involved.
•    Loans are stand alone with no additional security required.
•    Loans to Non UK residents.
•    Lender uses in house valuers.

At the end of the loan term the loan is redeemed with no exit fees. If this is not possible for whatever reason then the lender will manage the resale of the asset and settle the loan on the borrowers behalf. The lender will endeavour to obtain the best value for the asset and any monies remaining once the loan is repaid will be returned directly to the borrower.

However large loans can be approved for other areas of the country other than the Southeast as long as they are in good locations or if the loan to value (LTV) is low. By good location that means the property is in a location where all properties are worth a similar amount so that the property is not unusual or is more expensive that the surrounding properties. What the lender is looking for is that the property that is used for security would sell quickly if for any reason they have to repossess the property and sell it on to recover their outstanding loan. As in all bridging loan applications the exit strategy is extremely important and without a viable exit strategy the application will likely fail.

So to recap large bridging loans are still readily available as long as the property is in a good area of London or the southeast. For other areas of the country as long as the LTV is not too large and the property will easily sell then large loans should not be a problem. Most importantly in all cases the exit must be realistic.