Clients financial options can be limited by the company they choose

Many brokerage firms or investment houses offer their own in house advisory team but independent financial advisers are often less biased and more likely to make a decision based on performance and risk rather than on fund ownership. This can be very useful to investors as independent firms often have access to a larger range of funds than an adviser employed by an account custodian. The more assets a firm has under management, the more options for funds and securities they can provide to their clients.

Despite the knowledge and education financial planners and analysts have, clients and investment advisers do not always agree. Oftentimes, firms will have an investment strategy in place that clients adopt as a part of their engagement with a firm. For example, many firms have asset class allocations within a larger scale distribution of fixed income versus equity. Although a client can often decide the ratio between the two based on investment amount and personal risk tolerance, it is up to the adviser to decide how much equity should be invested where, such as in real estate and or domestic large cap investments. Many advisers have particular funds they choose to use within an asset class based on rate of return, historical performance, fund management, and other factors. While this can be a valuable strategy, especially for firms that have a strong grasp on investment strategy, it may not fit precisely with what a client wants.

Clients, especially those who are finance amateurs or professionals, may have strong ideas about what sorts of investments they do or do not want to take part in. For example, a client with a high risk tolerance and a substantial portfolio may be interested in a high private equity allocation despite an investment adviser’s warning that private equity can be a dangerous market. In this situation, an adviser needs to think carefully. To keep a client engaged with the firm, it is not wise to ignore his or her wishes entirely. However, weighing the odds and not jumping into investments can save an adviser’s reputation and an investor’s portfolio. Deciding how to handle a situation where a client wants to deviate from a firm’s strategy or opposes an adviser’s investment philosophy can be one of the most complex facets of portfolio management.

For small firms with one-on-one management strategies, sitting down with a client is a good way to approach an issue. Doing background research to support one’s opinion can be a strong mediation tactic for both adviser and client. With clear facts, rates of return and historical data, both parties can provide solid arguments for or against a position. Some compromise might be necessary, as well as additional research on the part of an adviser and his or her firm. Getting options from other professionals or a company’s investment committee members can be a great asset in decision-making. In come cases, there are ways both parties can win. If a client is interested in buying gold, for example, the solution might be a gold exchange traded fund.

Sometimes, however, there is no chance for compromise. Many firms develop investment strategies and do not care to deviate from them for reasons such as personal philosophy and professional reputation. In these instances, it may be better for the adviser and client to part ways. Different firms meet different needs, just like clients have different wants. This is part of the investment advisement industry, and a possibility of which both clients and advisers need to be aware.

Castle Harbour Securities is a boutique financial services firm dealing with banks, family offices, sovereign wealth funds, corporates, trading companies and professional asset managers.

 
John Yates

The post Financial Investment Philosophies and Client Options appeared first on Greenfield Finance Blog.

Buy-to-Let Property

Understanding the buy-to-let market is crucial if you intend to invest within this market. The types of mortgages involved in the buy to let market include the following.

• Repayment Mortgages

A repayment mortgage enables a person to own property when the mortgage term has finished without needing to pay a separate fee to cover the capital that they originally borrowed. However, monthly payments may be a large part of the rent earned. This leaves only a small return for the owner. Additionally, they are also required to pay taxes on the capital payments that they make.

• Interest Only Mortgages

An interest only mortgage allows the owner to keep a small share of the rental income every month. They will also need to pay off the outstanding capital when the mortgage agreement has finished. This is the reason why provisions need to be created for these mortgages. Owners can deduct their mortgage interest payments from their rental income when paying taxes.

Qualify for a Buy to Let Mortgage

The process involved in getting a buy to let mortgage is the same as a regular mortgage agreement. The only difference between the two is how the borrower can demonstrate that they earn enough money from their rental property to meet their financial obligations. If an individual happens to qualify for a buy to let mortgage, they have the benefit various mortgage options.

Things to Look for in a Buy to Let Mortgage

A lot of lending companies will expect a property’s rental income to be higher than the mortgage repayments. The level that is acceptable differs between lenders. Some lending companies will consider a properties rental income. Other lenders are only interested in their clients’ standard income.

Buy to let mortgages that have a fixed rate enable the borrower to pay an agreed rate for a specified time period. This period is usually between two to ten years. The main advantage of opting for this type of mortgage when purchasing a property is that it allows buyers to estimate exactly what their future expenses are going to be. This helps an individual be aware of the penalties for an early settlement of their loans.

Some lenders also provide flexible buy to let mortgages. This kind of flexible mortgage option allows an individual to underpay or overpay on their loans. It also allows a person to take payment holidays without incurring any penalty fees.

When looking for a buy to let loan, pay attention to both the annual percentage rate and the headline interest rate. These two important factors include all the administrative costs and set-up fees. You should always be thinking about flexibility, does the loan permit an early repayment and be aware of the remortgaging potential, should you need this, which would be crucial to release capital to help purchase further properties.

Using a Letting Agent

Letting agents working on your behalf can negotiate with lenders. Additionally, they have in-depth knowledge about the properties in the area where their clients are buying. This is very important because the type of real estate that their client might purchase may help determine the rental fee and the type of individuals who rent it. Having knowledge about the demand for a particular type of property is a very important part of their job.

They can also advise a new ‘buy-to-letter’ on the decoration that suits their property and the rental market. This includes furniture and fittings that you need to provide. At the same time, they also assist in finding tenants who pay their rent on time every month. Furthermore, lending applications have a higher chance of being approved if an individual decides to place their properties with letting agents.

Additional Buy-to-Let Property Financing

Bridging loans are offered for various financial requirements for example time sensitive deals such as auction purchases, money for business cash flow and light property refurbishment, the list is endless. These are based on 1st and/or 2nd charge loans and can be arranged in a very short period of time.

YOU CAN USE GREENFIELD CAPITAL BRIDGING LOANS FOR:

• Property auction bridge facility
• Property development bridging finance
• Finance property conversions
• Finance property renovations and refurbishments
• Bridging loans to break mortgage chains
• Business bridging loans to raise working capital
• Finance buy-to-let properties.

Some of our clients are first time property developers, others are occasional speculators who have spotted an opportunity and need to raise capital whilst others are seasoned professionals. So, whether it’s for auction purchases, short-term commercial finance, or property development transactions, Greenfield Capital can help with your bridging needs.

Call our free help line on 0800 779 7097 to speak with one of our experienced Relationship Managers, who will guide you through the simple bridging process and answer any of your questions

 
John Yates
 

The post Buy-to-Let property, understanding the investment appeared first on Greenfield Finance Blog.

Interest Rate Swap Issue

The overall interest rate swap issue arose from commercial business lenders and banks requiring small businesses to buy interest rate swap insurance for business loans they took out. Should the loan interest rate go up, the swap would act like an insurance policy to pay for the related increase in borrowing costs. Thousands of businesses were pulled into this process and required insurance language in the U.K. through business loan borrower programs by all the major banks.

Unfortunately, the general market interest rate indexes that the commercial loans were hinged on dropped. Businesses at first thought they were in the clear with a lower borrowing cost as a result. However, the fine print in the loan agreements allowed banks to charge the borrowers for the interest rate drop as well through the swap terms, costing businesses involved thousands of British pounds in penalties as a result of the swap agreements. This particular catch has been repeatedly complained about as never having been clear to small business borrowers who applied for only loans in the first place.

As far as recent legal matters, the Ministry of Justice has decided to look into specific complaints associated with a new claims management business that has turned out to have been established by a former Barclays banker, one of the big U.K. banks involved in the swaps issue. The claims business was highlighted to Justice’s attention after number of small business owners affected by the swap mis-selling made their concerns public to the government regarding recent letters and calls.

The claims management business, Grosvenor Park Advisory Partners, launched an unsolicited marketing campaign, attempting contact with numerous small businesses affected by the swap loan agreements. The marketing approach, not surprisingly, offers expert help in seeking claims on rate swap mis-selling issues in exchange for claim representation and a service fee. Leveraging the former banker’s role in Barclays, Grosvenor Park’s marketing letter stresses “inside connections” that provide the potential for better-than-average swap claims success to customers. The letter campaign was then followed up by cold phone calls from Grosvenor Park to targeted recipients, with the same messaging. While marketing of representation services isn’t necessarily crossing legal lines, what has alerted many to the company’s approach is that the contact information used, particularly phone numbers, were assumed by the affected borrowers to be confidential information only provided to the original bank lenders. Concerns are now raised that the former Barclays banker and Grosvenor Park have been using confidential data from the former Barclays employer’s loan files.

The Ministry of Justice has already taken first steps, forcing Grosvenor Park to change its public business description on the Internet and drop the moniker of being a licensed claims management company. Barclays, as well, has moved into damage control, threatening its own litigation to protect its name and disassociate from any misused of Barclays confidential customer information.

In response to all the above Grosvenor Park Advisory Partners has denied any wrongdoing or unethical behavior. However, the initial facts have already raised enough eyebrows that concerns are now being publicized for business and consumers to watch out for similar ventures and activities.

John Yates

The post Rate Swap Mis-Selling Claims Company Investigated appeared first on Greenfield Finance Blog.

We have compiled a Bridging Loans Terminology sheet for information.

Bridging Loans Terminology

Applied or Nominal Interest Rate is the rate of interest calculated by the financing institution. This will be the amount the borrower will be responsible for. It’s not to be confused with the APR. This rate will likely be slighter lower than an APR because there will be no charges attached to it.

The Annual Percentage Rate (APR) represents the total interest amount a consumer will pay on any existing loan or credit facility. Normally the APR will also include any and all charges the consumer is expected to pay out. Loans, mortgages, credit cards and pretty much any other type of financing will be have APRs attached to them.

A Base Rate is also called the repo rate. It refers to the base and minimum rate that banks use to prepare for the lending of money. It’s a benchmark used to adjust interest rates for other financial institutions.

A Bridge Loan is a short term financing that’s advanced to a consumer. This gives the consumer the opportunity to acquire a property where immediate funds are required for a brief time period. This allows said consumer to have access to funds before the actual financing is implemented.

The Borrower is the consumer that accepts financing from a lender for any number of reasons. The consumer enters into an agreement with the lender to repay any funds presented through a series of timed payments on a consistent basis.

Capital is the sum of money that will be invested or borrowed for a specific intent. It will be distinct from any returns a consumer acquires through any interest or investment that’s required for repayment. Capital is used throughout the life cycle of a loan to distinguish the outstanding amount that’s owed. This will not include interest or charges.

Closed Bridge is a bridging loan that is predefined and contains an exit in place for the borrower to repay the bridge loan. Closed bridging is often utilized for properties that are purchased at auction and the bank offering a loan has yet to complete its loan process in time. The same applies to borrower’s looking to sell, using expected equity as collateral to get a quick loan while waiting for the bank to come through.

The Collateral Security is an extra security provided by a borrower. This security is guaranteed of their intention to repay borrowing. Under most circumstances, the security may be in the form of deeds to property.

The Cooling Off Period is covered by the Consumer Credit Act of 1995. That gives a consumer a 10 grace period to reconsider any financing agreement. If the consumer does change their mind, they must state so in writing without any further obligation. If the consumer does not take advantage of this opportunity to waive, the contract takes effect immediately.

Credit Agency, Credit Reference Agency or Credit Bureau Agency, refers to those entities that compile and maintain credit records or histories that will be utilized by banking institutions to determine a consumer’s creditworthiness. Consumers are also allowed to review their credit reports to see what information is being shared with potential lenders. While there are several agencies that supply this type of service, the three major ones are Experian, TransUnion and Equifax.

Credit Insurance is a financial instrument utilized to protect a borrower if they should find themselves unable to make their payments. The credit insurance policy will cover all monthly loan repayments for any periods of illness or hardship.

A Credit Report contains Information that is used to determine a consumer’s creditworthiness. They are attached to scores that can dramatically affect a consumer’s potential to receive financial assistance. These reports are offered to lenders on request. These reports can consist of, but may not be limited to, consumer name, address, inquiries, collection records, credit record and public records such as bankruptcies and tax liens.

The Credit Risk is absorbed by the lender. They enter an agreement that a consumer will repay any financing offered with the understanding that, for any number of reasons, the consumer might not fulfill the agreement. Credit scores and credit histories are utilized to determine the risk of a consumer’s ability to pay off debt. Consumers with sufficient credit scores are seen as less of a risk.

The Creditor refers to the party claiming a third party, either a consumer or business, owes them money.

Debtor. See Borrower.

Default. See In Default.

To be Delinquent is the failure to meet the required minimum payments on a loan or debt on the due dates. This due date will fall on a specific day of the month or on a regular cycle, most likely every 30 days.

A Deposit is the sum of funds put down as an initial installment of a transaction. A deposit on a property ensures the seller will hold the property as a sign of good faith the buyer will follow through on getting financing and purchase said property outright.

The Early Reduction Charge is made by a financial institution that’s payable on specific types of loans. This action is performed if the financing is redeemed or partially redeemed with an agreed upon early redemption charge period.

The Fair Credit Reporting Act (FCRA) is a consumer advocate organization that ensures confidentiality, proper usage, and accuracy of information in regard to a consumer’s credit reporting to credit reporting agencies.

A FICO Score is a three digit number that gauges creditworthiness. It is used by lenders and financial institutions to make credit and lending decisions.

The Fair Isaac Corporation (FICO) is a public company that provides credit scoring and analytical information. They are also responsible for the FICO score that lenders and financial institutions employ to make credit and lending decisions.

The First Charge is the ranking of the bridge loan’s security. Referring specifically to a first mortgage and/or charge against the security property. The first charge lender holds the loan’s senior security position.

A Fixed Interest Rate is a set interest rate than never changes through the life of a loan. This is considered an ideal rate as a consumer avoids the market’s fluctuating rates. It gives the consumer the opportunity to budget over the term of any loan as repayments stay consistent.

To be In Default is when a consumer fails to meet their obligation of repayment on the financial instrument. This can occur after several billing cycles or a single one. The lender can then file the account as in-default. Repercussions can include demand of full payment on the loan, foreclosure on the property and damage to the consumer’s credit score.

Loan Insurance may be a requirement from a lender that the consumer would be responsible for. The instrument would cover any loan the consumer has with the lender. In the event of any inability to make payments through loss of earnings or death, the repayment of the loan would be guaranteed.

Mezzanine Finance is a financial instrument used with a bridge finance on interchangeable terms. Technically, however, this type of instrument refers to the second charge loan. That means the consumer has a subordinated, or mezzanine, security to the first charge lender.

Open Bridge is a bridge loan that does not contain an exit for the borrower. This would usually require a detailed exit strategy for the borrower to repay the loan. If a consumer has a long term relationship with a bank and they need to settle a financial transaction right away, the bank may advance financial support to tide the consumer until they can get mainstream financing.

Risk. See Credit Risk.

A Second Charge is the ranking of the bridging loan’s security. It refers to where the loan is secured by a mortgage and/or charge behind the first charge lender. The second charge generally has a higher interest rate that’s payable to the lender.

A Second Mortage, also referred to as a secured loan, is an additional mortgage on a property that already has a mortgage in place. A second mortgage is likely to have a higher interest rate than the original mortgage instrument. This reflects the fact money is being borrowed heavily and the consumer has made themselves a potential risk.

The Total Charge for Credit is any full amount that has to be repaid. This would include the full loan amount, all interest payable, administrative fees, insurance charges and any other costs. This figure is used as the foundation where the ARP is calculated.

Greenfield Capital Bridging Loans & Finance

John Yates

The post Bridging Loans Terminology appeared first on Greenfield Finance Blog.

Property Auction Finance Lenders

However, the right lender should be chosen in order for the borrower to obtain the advantages of auction finance. Finding the right lender requires thorough research and investigation. Borrowers can search for lenders online and read reviews and feedback from previous clients. They can also ask other people for recommendations.

Choosing the right lender also requires the borrower to identify the funding allowed as others may provide amounts that will not cover the purchase. The borrower also needs to find the lender that can offer the most suitable payment terms depending on his or her financial ability. These are essential factors that borrowers should identify before choosing to go through the application process.

Advantages of Auction Finance

• Fast Approval

One advantage that borrowers get from auction finance is faster approval than they with conventional mortgage loans. The lender knows that auctions are speedy and only provide a short span of time for the future homeowner to purchase. This is why auction finance lenders usually release the funds quickly after the auction has taken place. The process is also less difficult than applying for a mortgage loan as borrowers are not obliged to choose new properties.

• Negotiable Terms

Auction finance provides borrowers with more flexible terms of agreement. Lenders offer negotiable contracts that may change depending on their discussion with the borrower and agent. This makes auction finance suitable for auctioned properties than mortgage loans.

Other mortgage lenders only approve loans for new properties or those in mint condition. They do not provide funds for properties that do not have good market value. However, auction finance lenders are more negotiable and lenient when it comes to the property’s state. A borrower may purchase a house from an auction for £50,000 but may need additional funds for renovations. Mortgage lenders do not commonly approve these loans or provide extra funds for the repair costs. On the other hand, auction finance lenders are more open to these financial needs and may provide the purchasing cost of £50,000 plus the expense needed for the renovation.

• Less Strict with the Property’s Condition

Traditional mortgage loans are strict and firm with their rules and contracts. This makes these lenders unsuitable for auctioned properties as there are often repairs and renovations needed. Mortgage loan lenders do not commonly provide funds for purchasing these properties and do not allow room for small scale renovations.

On the other hand, auction finance offers borrowers more freedom when it comes to their chosen property. They can purchase an auctioned property that requires renovations or repairs and have it funded through auction finance lenders. There are some lenders that even provide great appraisal values for the property.

• Flexible Repayment Terms

Another disadvantage that comes with mortgage loans is the short repayment term. These loans usually require the borrower to pay within a period of two to three years. This can be an inconvenience for those who are not able to meet the required monthly payments as they will face costly interest charges.

Auction finance lenders are more flexible with their repayment schemes. They provide borrowers longer periods of time to complete the payment. Some lenders also offer good interest rates in order for borrowers to avoid unnecessary costs.

How to Finance a Property Using an Auction Lender

• Determine the Desired Property

The borrower should search for properties that are up for auction. After determining the property desired, the borrower should do proper research on important details. This includes the property’s structural state, location and renovations required. A pre-auction visit is also often best for bidders to physically check the property.

• Find an Auction Finance Lender

Before purchasing an auctioned property, the borrower should find a suitable lender. The borrower should review the lender’s terms of agreement before completing the application process. The borrower can fill out the application form after determining the contract details. This can be done online at the lender’s website.

• Bring the Required Down Payment

During the auction, the borrower should bring the required down payment or have a cheque book ready. A down payment of 10 percent is usually required in order for the bidder to secure the purchase. This should be covered by borrowers before the auction finance lender provides the funds.

• Provide Solicitor’s Details

The solicitor’s details should be provided once the bidder has secured the purchase. The borrower or bidder should have the information ready beforehand. The data provided should be complete and accurate.

• Arrange the Purchase

The borrower should go back to the lender or solicitor and have the purchase arranged. This involves all documents that may be required for the lender to release the funds. Insurance coverage should also be dealt with during this phase.

Greenfield Capital

 
John Yates

The post Auction Finance for a Property and finding the right Lender appeared first on Greenfield Finance Blog.

Changes to UK Mortgages in 2014

The first major focus of the changes is an increased threshold of validating whether a prospective borrower can indeed manage and payback a mortgage loan requested. Borrowers will be required to show that they not only have sufficient income to handle a debt liability for a home but the requisite cash flow to settle the given mortgage when the payment window is completed. Borrowers will not be allowed to argue, and lenders will not be allowed to assume, that real estate prices will continue to rise enough to pay off the loan and play a house-flipping game of the past.

The new requirements for borrowing eligibility are not going to be a great shock to the system. In fact, many lenders have already moved to put the “new” requirements in place. So the law and regulations for many institutions are simply catching up with practice already being implemented on new mortgage applications.

However, those existing borrowers now who are now in interest-free loans and want to migrate to a traditional mortgage will find it far more difficult. In many cases, these existing borrowers won’t qualify for a refinancing loan under the new eligibility rules to go into effect in 2014. Absent coming up with cash to pay off the existing liability, these borrowers are stuck in place. Those who are unable to continue making payments face a loss of the property and having to settle for rental accommodations.

The other risk with the more stringent borrowing criteria is the possibility that homes in the upper range of pricing will now become “untouchable” with the new borrowing criteria. First off, those buyers who provide documentation to self-validate their own income, such as small business owners, won’t be able to get approved now in most cases. Second, interest-only borrowers won’t be able to find a product that meets their interests in borrowing. Both reactions will cause an over-supply effect on the market, forcing higher priced homes to drop in value to become viable again.

Given the way the new rules are drafted, some market experts estimate that the changes will affect over 9 million homes and households in the United Kingdom. From the Financial Services Authority perspective, the changes will have no negative effect on new home buyers nor will it dry up low interest rate loans for new, first-time borrowers. Additionally, after hearing concerns about existing borrowers being trapped, the Authority agreed to include language that would allow lenders to effectively “exempt” or “turn off” the stricter lending requirements where the existing borrower 1) had a good repayment record and, 2) the amount being refinanced is the same amount the current outstanding loan is worth, i.e. the new loan provided isn’t for a greater amount.

Ultimately, the Authority wants to flush the market of what it sees as poison pill loans or financing where the borrower can’t likely finish the loan and should never have been approved to begin with. Since it can’t very well wipe out those liabilities arbitrarily, the Authority will take the approach of grandfathering these risks out of the system by simply making it impossible to provide high-risk loan again. So far, the banks and lending institutions are on board.

Given the anticipated delays in finding the perfect  mortgage, Greenfield Capital can provide short term bridging loans in order to facilitate the property purchase on time.

 
John Yates

The post New Changes on the Horizon for UK Mortgages appeared first on Greenfield Finance Blog.

The Society’s financial services and products sales, including banking and deposit services and investment programmes (including unit trusts, individual savings accounts/ISAs and pension accounts) add to its core business. Nationwide also offers members access to secured or unsecured loan products and credit cards.

Residential loans. In spite of Nationwide’s decision to diversify, residential (retail) real estate is the firm’s bread and butter: about 67 percent of revenues derive from residence loans. Approximately 10 percent of the Society’s residential loans are new homeowners. Nationwide acquired a good part of the Bank of Ireland/UK residential loan portfolio in 2011. The acquisition cost £1 billion or about USD 1.6 billion.

Decline in 2012 pre-tax profits. Analysts note that pre-tax profit fell from approximately £181m in 2011 to almost £151m. Nationwide responded that declining pre-tax levels were affected by commercial loan portfolio losses of approximately £193m.

According to Bloomberg, high PPI claims, associated with the “mis-selling” of loan insurance were also cited by the company as a rationale for the decline in pre-tax profits. Provisions of £45m wererequired to offset the firm’s processing of “invalid claims.” About 42 percent of these processing issues resulted when a payment protect insurance (PPI) policy was not in force; about 72 percent of the invalid claims resulted from submissions by claims manager firms.

PPI covers consumer loan and/or credit card payments when debtors cannot make monthly payments due to illness, injury, accident or job loss. Lenders like Nationwide have been charged millions of pounds in fines for the “mis-sale” of PPI to consumers.

Nationwide: “Thorny” SME environment. According to the Financial Times, the outlook for large lenders gaining headway into SME lending creates concerns. Government and views towards SME lending is acknowledged as challenging for large retail institutions like Nationwide, according to CEO Graham Beale. “Red tape,” expected in the residential home loan process, is not welcomed during an SME’s quest for expedited financing.

Specialist bridge financing lender. Tetail institutions focused upon the needs of originating and servicing residential real estate loans to individuals and families maintain a specific infrastructure. Dedicated staff work with clients to gather the information needed to qualify for a loan. Customers organize and collect the information required by the lender, and the institution’s lenders assess risk according to a historical, defined financial model.

The needs of small to medium-sized businesses differ from those of residential real estate clients. Bridging lenders are not limited by traditional retail lending models. According to authors Eli Talmor and Florin Vasvari (“International Private Equity,” 2011), working with a bridging lender eases the process of applying for and obtaining needed funds.

Why SMEs need bridging financial specialist lenders. SMEs, as high-growth businesses, often find themselves in need of cash whilst awaiting receivables. Short-term bridge loans assist the business in meeting cash needs for a determined period. Upon arrival or receivables, the SME settles the outstanding bridge loan (usually in full).

Bridging finance and pre-IPO or liquidity event. Before a private company completes the initial sale of equity or debt shares in the public markets, bridge financing helps the company to stay afloat, according to authors Dietmar Ernst and Joachim Häcker (“Applied International Corporate Finance,” 2012).

Because underwriter firms cannot tell the pre-IPO company when its shares or bonds will be offered for dealer sale (due to pricing or calendar constraints), bridge loans ease current obligations that must be paid by the company. Timelines to fulfill legal requirements before an IPO may be considerable. Prior to the initial public offering (of an average one to two years), the SME may focus on the new requirements of reporting as a public limited company (plc). Without the urgency to create liquidity, the company can afford to wait for strong market conditions. Upon distribution of the IPO, the company usually has available proceeds to settle the bridge loan.

SME real property transactions.During interim purchase and sale of real estate contracts, the SME may need a bridge loan. For example, if the company plans to sell an existing space and purchase a new one, the bridge loan allows the purchase to occur before sale. Upon completion of the sale, the company settles the outstanding bridge loan.

Loan collateral requirements. Large financial institutions rely upon many criteria to ensure that individuals and companies to whom they make loans are highly likely to repay them. Getting a residential home loan can take months as the lender collects tax and financial data to assess borrower risk.

Nationwide is a firm with expertise in making residential real estate loans to individuals and families. Recent commercial loan losses suggest this is not an area of expertise for the Society.

Traditional lenders accept prime real estate to collateralise or secure a loan. These lenders are unlikely to accept less than prime real estate as collateral in today’s tightened credit environment.

How bridging lenders differ.Bridge lenders approach making SME loans in a different manner. Their business focus is making bridge loans to small to medium-sized businesses. They have no interest in making residential (retail) real estate or credit card loans.

The bridging lender is likely to accept less than prime real estate as collateral in a short-term bridging loan. Bridging lenders also want to make competitive, short-term loans. Unlike traditional banks and lenders, bridging financiers understand the time-sensitive element of arranging needed SME funds. Lower bridging financier’s interest rates, when compared with those offered by traditional lenders, makes sound financial sense to growing companies.

The bridge financier welcomes residential real estate or office building transactions in some situations. The developer seeking to renovate and sell properties within a short period (e.g. four to six months) frequently benefits from less expensive bridging financing. Conversely, longer-term property development spanning several years is likely best suited to longer loan maturities offered by traditional lenders.

Evaluate bridging finance options. Finding the right lender and loan program depends upon the company’s needs and perspective. Analysis of the SME’s financial goals and resources helps to determine the best way to finance growth or maintain liquidity.
Greenfield Capital

John Yates

The post Nationwide and SMEs: a “thorny” prospect in 2014? appeared first on Greenfield Finance Blog.

Step 1: Consider your motives

You should always consider carefully your motives for wanting to refinance a mortgage before beginning the process. It is important that you recognise your long-term business objectives as this will enable you to choose the loan most suited to your needs, whilst allowing you to reflect upon your desire to refinance. Would it be cost effective in the long run? Is it even possible taking into consideration your finances?

Step 2: Preparation is key

Make sure that you prepare all the necessary documents that the lender will require in order to evaluate your business. This will include a projected cash flow statement, tax returns, profit and loss margins as well as balance sheets. A mortgage lender will need to see a detailed and accurate business plan.

Step 3: Do your homework

You should do some research to ensure that you know what the property you hope to refinance is worth in today’s markets. It is possible that the value may have changed a great deal since the original mortgage and thus, effecting your LTV. Do not rule out the possibility of having to find additional equity to qualify in order to refinance your loan.

Step 4: Utilise a debt service calculator

This will enable you to make objective projections in order to assess whether or not your monthly income will be adequate to cover the payments for any specific loan product.

Step 5: Meet with a prospective lender

You must reflect upon and discuss how your credit rating may affect any given transaction. A bad rating will certainly be restrictive and usually comes with a higher interest rate. If this is the case for you, consider a balloon payment mortgage, but act with caution as this may lead to a second refinance in the years to come.

Step 6: Be savvy with regard to costs

It is crucial that you understand the costs of any loan being considered. You may need to cough up for environmental reports, appraisal and lender fees as well as for title insurance. Reflect carefully before agreeing to a deal and shop around to get the best possible terms.

Refinancing your commercial mortgage can have a very positive effect on your business. By following and employing these simple yet effective stages, you will ensure that you go about the refinancing of a commercial mortgage in the correct manner. If instead, you are just starting your business, look for properties for sale in the UK here, this will get you started with finding that perfect commercial property finance for your business.

Greenfield Capital, our partner company is also able to  provide Commercial property bridging finance

+

GreenField Capital Bridging loans

John Yates

The post Steps to Refinancing a Commercial Mortgage appeared first on Greenfield Finance Blog.

My client was looking to re-finance his very successful fish & chip shop in Birmingham valued at 200k which has a healthy net profit. His plans were to expand the business and he had approached his own High street bank for the 100K mortgage, which would been enough to pay off his his existing facility for 60K and the additional 40k which was to be used to towards the refurbishment.

However, in the clients own words “they were messing me around, even though I had been a loyal customer of the bank for many years”. So he came to Greenfield for help via a friend of his who had done business with Greenfield finance before.
I helped him firstly with better terms, I got the whole 100k he wanted agreed on a rate of 4.2% over a fifteen year period. That was more money than his own bank had offered him and a cheaper rate.

This helped him expand his business and save money, I was also able to arrange a cheaper deal on his asset finance too, so my client was very happy with the whole financial package I was able to organise, the client was so happy in fact, he offered me free fish & chips any time, however my waste line wouldn’t agree to that.

+John Yates

The post Commercial Finance for a Fish & Chip Shop, Birmingham appeared first on Greenfield Finance Blog.

We recently took over finding a source of funds for a client looking to purchase a commercial property in London.

We took over simply because his previous broker had not been responding to the client and we had asked for documents from the client within an hour of speaking with him and started the basic underwriting process almost immediately with him.

The Commercial Property

It was an interesting property because our client was purchasing a ground floor commercial office unit with a large presentation room that our client wanted to turn into a photograhic studio for his business.  His purchase price started off at £450,000 plus VAT.

We helped the client to renegotiate the price lower on the basis of the heads of terms we produced which were credit sanctioned subject to a valuation.  The deal we agreed was at 3.75% over bank base rate and we provided the client with a loan to cover his VAT.

Our client has since fitted out the property to his specifications and moved his already trading business into the new premises and is enjoying not having to rent space for his photographic shoots.

GreenField Finance – Commercial Property Finance

 
+John Yates

The post Commercial Property Finance of a London Photographic Studio appeared first on Greenfield Finance Blog.