As a business, Signature Private Finance has always looked for ways to get a deal done, rather than rely on a computer to say no, with strong personal relationships between our lending team and the commercial brokers we rely on.
This approach has ensured our rapid growth and seen lending targets ticked off in monotonous regularity, but sometimes a good application will help deliver the funding a client needs, especially when they have a project on a strict deadline.
In this blog, I cover my top 5 tips to help the application process, drawn from experience of what makes life easier for our lending team and the decisions we have to make.
This may sound like a simple and obvious tip, but you would be surprised how often a heavy refurbishment proposal has figures that are way out of line, even bordering on the unbelievable.
This could be anything, from the value of the property as it is at the time of application, to its suggested final valuation once the refurbishment has been completed.
Make sure you crunch your numbers, speak to experts in the field and make sure you are working within the correct timescales and realistic budgets. If you do this, there is no reason heavily refurbishing a property using a bridging loan could not prove very profitable.
Using a firm of solicitors experienced in the concept and process of bridging is of critical importance. We find one of the main reasons a borrower decides to use a bridging loan, is how quickly the funds are needed, typically to take advantage of a good market opportunity.
A firm of solicitors with experience of property finance in all its guises, makes the whole process quicker, easier and stress-free from start to finish.
And remember, most of the time lenders will be able recommend at least one experienced law firm if you only ask and it’s perhaps the first heavy refurbishment loan you’ve applied for.
Having all the correct documentation regarding ownership, planning permissions, bank statements, company accounts, etc., are so important when applying for a heavy refurbishment loan. Without them you might as well not even start the process.
Make sure your ‘house’ is in order and the rest will follow. A lending manager assessing the viability of the deal is more likely to look on your application favourably if they can see you have all your documentation in order from the start.
By demonstrating you are organised and know what needs to obtained before it’s asked for, will inspire confidence and increase your chances of approval; it might even improve the rate you are offered.
Ensure you have a good, viable exit plan. This is one of, if not the most important things to consider when taking a bridging loan for heavy refurbishment.
Let’s be honest, nobody is in the property game for fun and taking a heavy loss due to not adequately researching how you will repay the loan, with facts and figures to back up your proposed exit route, you might as well throw your application in the bin.
Speak to experienced tradesman, quantity surveyors, architects, the more the better. This doesn’t mean you necessarily have to be paying for a report, but just the opinion of an experienced professional will be worth its weight in gold before you have outlaid any money or time.
Decide if you will put this onto a long-term mortgage for rental purposes or sell the property to make a short term profit. The better the detail, the better the chance your application will be approved.
This is a detail that is far too often overlooked. Always wanting to stay positive and believing the glass is half full is extremely important when it comes to property developing, but it’s also important to not let those rose-tinted glasses get the better of you.
There are many cases in the bridging world when a borrower is convinced their plan is fool proof; “the property will be worth 10 times what I paid when it’s done.”
Which would be great, but it’s important to remember that if the lender thinks it sounds too good to be true, they’ll think it probably is and that usually means no loan.
Have a robust and carefully thought-out contingency plan. What happens if weather hampers progress, a tradesman has a family emergency and needs to cease work for a few weeks or property values are hit by Brexit?
Whilst there are almost too many to think of, demonstrating you have considered potential hiccups and have a practical solution in place, will again instil confidence in your lender.
It’s also worth noting that a good plan made when the pressure is off at the start will be worth so much more when time is of the essence further into the project, because in my experience, few heavy refurbishments projects ever go according to plan.
There you have it, my 5 top tips to help tip the balance in your favour when it comes to securing a bridging loan for a heavy refurbishment project. It’s not a definitive list by any means and if you have a project you’d like to discuss, then please get in touch and we’ll chat through the process.