Bridging finance to fund deposit for purchase

THE SCENARIO

Clients sometimes erroneously believe we can only help them with arranging their finance, not their deposit—but I was recently able to support a client by arranging a bridging loan for his deposit.

My client was a medical professional with his own business, which he had founded over a decade ago. The steady growth of his company meant he needed to acquire new office space; he had located the office and we had helped him to finance the bulk of this purchase. The office in question was a £1.6million property, for which I arranged a first charge loan of £1.2million.

In light of this, he ideally needed a £400,000 deposit in order to proceed with this purchase. However, this would leave him with very little liquidity, and was ultimately more than he wanted to commit. As he had £300,000 readily available, he needed to arrange a loan of £100,000. He therefore asked me to find a creative solution which would enable him to proceed with the purchase of this office.

OUR SOLUTION

Fortunately, my client had another asset in the background—a holiday home in a beautiful Welsh seaside resort. This property was valued at approximately £220,000, so I proposed to my client that we used a bridging finance solution secured against his holiday home to generate the rest of the money needed for the deposit.

This was an unusual bridging finance solution. Typically, holiday homes are harder to raise finance on, so we would not usually go down this route. However, because speed was important, I felt it would be quicker to do this than trying to arrange a second charge loan.

When trying to put a second charge loan in place, it’s necessary to receive the permission of the first charge lender—something which can take up to 30 days. I felt it would be faster to arrange the facility with a fast-moving bridging lender.

I therefore approached a bridging lender that I know is well deserving of their reputation for speed. I negotiated a £100,000 bridging finance facility for my client, at a rate of 0.99% a month for 12 months.

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