One of the Bridging loan sector’s enduring challenges is to convince brokers and advisers that the potential uses of short term secured loans go well beyond simply facilitating a property transaction and in fact, bridging loans can be employed in a vast range of circumstances when a short term capital raise is required.
In this instance, the purpose of the loan, made to a business couple, was to facilitate the purchase by the wife of 50% of the shares in a company in which the husband already owned the other 50%, thereby giving them complete ownership of the company.
United Trust Bank took a first charge over the borrowers’ home as security for the loan. However, the borrowers’ expected (and preferred) repayment route is from the sale of a shareholding in another company. The borrowers do however have plenty of equity in their large home and would downsize if it became necessary to exit the bridging loan by selling their property rather than the shares.
As ever, when considering a short term loan, there must always be a critical focus on the exit strategy and in this case the borrowers were fortunate to have two exit routes available. However, it’s also worth remembering that whilst the lender will want to be satisfied that a viable exit is available, there is no compulsion for the borrower to repay by that route if a more preferable alternative becomes available within the term. Indeed, these particular borrowers may well find a third way to repay the facility without downsizing or selling their other shares.
That’s one of the great attributes of short term secured loans. They are flexible on the way in and on the way out.
Loan: £409,300
LTV: 27%