Bridging Loans Could Provide The Solution For Struggling Businesses

How bridging finance gives businesses a short-term cash injection when it’s needed most

Every year throughout the UK, many businesses large or small find themselves in troubled waters. This is not something new, and will remain a challenge associated with running a business in this country. The recent rise in interest rates – the fifth in the space of a year – is likely to exacerbate this problem, with many businesses likely to fall slightly short of their monthly commitments.

An inability to pay invoices, a delayed shipment or unforeseen natural events can all result in the end of your business.

In these situations, short-term financing solutions can be the saviour of a business, because they provide valuable time for these organisations to re-group, take stock and formulate recovery plans, or simply for expected incomings to be gathered. Companies should always be aiming to achieve long-term, sustainable solutions, but sometimes, short-term action is needed.

In 2002, Network Rail secured a £9 billion pound bridging loan to buy out the shareholders and bondholders of the rail infrastructure company, Railtrack, which was in administration at the time. This loan kept the UK rail network in full operation, and gave it a new breathe of life. It was able to create timetables for bringing the ailing network out of the red and into the black.

More recently in 2004, MG Rover went through a period of tremendous financial adversity, when it was reported to be losing £25 million per month. Threatened with immediate closure, MG Rover found a short-term solution through the UK Government, which put forward a £6.5 million bridging loan. This enabled the ailing car manufacturer to cover workers’ salaries, and keep the business going for longer, giving it more opportunity to draw up emergency recovery plans.

Many of the commercial uses for bridging loans are for the acquisition of properties and/or other companies, however, they also have a wide range of purposes for those organisations needing a quick-fix. Businesses that require a short-term cash injection can access bridging finance quickly and easily, and use the loan to re-invigorate their organisation and set it on the road to recovery.

Bridgingloans.com is the new public face for Bristol & West Investments Plc which has been helping businesses with their short-term loan requirements for over 25 years. As a principal lender of short-term financing, it has the flexibility to listen to proposals from any organisation. A bridging loan is secured against property, but can be granted for any purpose. Bridgingloans.com recently raised its maximum loan amount to £10 million, and increased its Loan to Value ratios on commercial properties to 75 per cent – this means that Bridgingloans.com can assist more and more businesses in their time of need.

Bridgingloans.com offers a unique combination of market leading rates, quick turnaround times and a friendly, experienced team of advisors.

This makes the company easy to deal with for a first-time or experienced borrower in the short-term finance market. Visit www.bridgingloans.com for more information or advice on short-term financing options.

Lenders call for buy-to-let mortgage regulation

According to research by legal firm and repossession specialists, Moore Blatch, almost nine out of ten mortgage lenders want to see regulation introduced specifically for buy-to-let mortgage advice.

The results of a recent survey suggest that some new buy-to-let investors are ill prepared for the financial implications of their investment, prompting lenders to call on the Government to regulate buy-to-let mortgage advice as if it were an investment product.

In its research, Moore Blatch found that 68% of lenders expect buy-to-let repossession to increase, while 50% of respondents thought buy-to-let borrowers were extremely vulnerable to repossession.

Eighty-one per cent of respondents agreed that repossessions will increase overall in 2008, while 31% expect to see shortfalls increase following sales of repossessed properties.

Of the 68% of respondents who agreed that buy-to-let repossessions would increase, 38% expect this to be by up to 10%; a further 31% predicted a rise of between 10% and 15%.

Thirty-five per cent of lenders questioned believe that void periods (periods when a property is unoccupied) will be the most likely reason for repossession; 27% expect the rise to be fuelled by landlords’ inability to subsidise their mortgages.

Finally, the survey found that 54% of lenders expect an increase in litigation against mortgage brokers by landlords claiming they were not given risk-based advice.

The Government, which is responsible for determining the scope of regulation by the Financial Services Authority, has not yet indicated that it will consider regulating buy-to-let mortgage advice.

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Price correction will not be major

UK house prices will continue to fall in 2008 but not at the rate that some analysts are predicting.

That is according to Stephen Nickell, former Bank of England policy maker, who told Bloomberg that he does not expect a major price correction.

Mr Nickell admitted that house prices are currently falling and conceded that the market prospects do not look good.

However, he ruled out a major correction and said that he would still feel confident investing in the UK property market.

“The actual size of the downturn is minute. How big is it going to be? I don’t know, but it won’t be very big,” he told Bloomberg.

“If you’ve got half a million to invest, I could well imagine buying some property. It’s still not entirely clear you’d be better off putting it in the stock market.

“And if you’re a sensible person with half a million pounds, you want to spread your portfolio,” continued Mr Nickell.

The latest figures from Nationwide revealed that house prices fell by 0.1 per cent in January.

British Land asset values fall

British Land posted a 1.3 billion pound quarterly markdown in its asset values on Thursday, and urged reluctant fund managers, property firms and valuers to cut portfolio values to reflect the malaise in the property market.“There’s nothing more damaging to markets than not believing the numbers,” said Stephen Hester, chief executive of British Land (BLND.L: Quote, Profile, Research), the UK’s second-largest property firm.

“We encouraged our valuers to mark down because we felt it was better to get the pain over quickly … Not everyone will have followed that approach,” he said.

While British Land admitted it was still nursing wounds inflicted by the credit crunch and financial market volatility, Chairman Chris Gibson-Smith said he hoped “the worst was now behind us”.

Analysts took comfort from Gibson-Smith’s words.

“This is a much more comprehensive and useful comment on the market correction than the Land Securities third-quarter result. British Land is fully recognising the correction consistent with the property bull market and the poor availability of debt,” KBC Peel Hunt property analyst Keith Crawford said.

By 10:20 a.m., British Land shares, which have fallen 42 percent in the last 12 months, were up 0.21 percent at 964 pence, outperforming FTSE 350 Real Estate Index, which was down 0.4 percent.

Survey reveals Manchester is debt blackspot

Manchester has been branded a debt blackspot according to a survey by Experian, Europe’s biggest credit reference agency.

The survey ranked areas of the UK using information on mortgages, credit and store cards, personal loans and payment behaviour. It also took into account information on previous bad debt, such as county court judgments.

The city, renowned for rock band Oasis and TV drama Shameless, had the highest percentage of households in financial stress.

It came ahead of Glasgow and Nottingham, with 28.7% of households suffering high or very high levels of financial concern.

Liverpool was also listed as a debt blackspot, as well as Hull, Middlesbrough and the London boroughs of Southwark and Tower Hamlets.

The survey was compiled for ITV1 programme Repossession, Repossession, Repossession. The documentary investigates how and why so many Britons got hooked on spending cash they didn’t have and examines the consequences.

Part of the programme was filmed at Manchester’s Citizens Advice Bureau. Marsha Healy, debt service manager, said debt has overtaken welfare as the biggest single area of enquiry. The pressure on our service is enormous.

The survey follows concerns about household finances being hit as bills and taxes increase faster than earnings. Approximately 10% of adults are spending more than they earn each month.

Accountancy firm Grant Thornton estimates that 28,000 people will declare themselves insolvent in the first quarter of 2008.

The report comes after estate agents Savills tipped Manchester as a property hotspot with potential for first-time buyers to get a foot on the property ladder.