Alternative Bridging – Flexibility of Loan Terms

There can be no debate that bridging finance is nowadays an extremely useful tool for those in need of business funding and it can be the ideal solution for SME clients in many cases.

Bridging Finance proving vital for brokers when dealing with SME clients

Bridging finance has become a vital part of a broker’s toolkit when dealing with SME clients. Over recent years the bridging loan has been used time and time again to unlock working capital. This helps businesses with cash flow issues and provides quick and easy injection of capital.

It has also been utilised at times when a term loan would previously have been the first choice for the business owner. That’s largely because of the rising interest rate environment of recent years.  This has made borrowers more reticent about taking out a loan for the medium to long term. Instead, they’ve opted for a shorter-term loan in the form of bridging finance in the hope that longer-term loans would be cheaper by the end of the bridging loan.

While bridging finance provides the solution to many a client’s circumstances, a term loan can sometimes be a better product for SME owners or property investors. For example, they may want to spread the cost of a large business-related purchase over a few years.  Or a property developer may require financing for longer-term schemes to provide more time to complete their current project. In such cases, a longer-term loan, delivered on a commercial basis, could well be the better option. Term loans are available for longer than the 24 months of a bridging loan; three to five years is the most popular spread.

Making term loans more attractive

However, this may still not convince those who are unsure about interest rates and the cost of borrowing over the next few years.  They may still like the idea of hedging their bets by taking out a short-term bridging loan.

With this in mind, Alternative Bridging has revamped its term loan product with no Early Repayment Charges (ERCs). Through this product, they are providing borrowers with the flexibility they need to refinance on to a longer term.

With the Alternative Term Loan, they are offering funding to property developers and SME owners.  The funding can be used to assist new and growing businesses, asset management situations or to release working capital.

Structured to match cash-flow

Available for terms from three to five years, up to a maximum LTV of 70% and a maximum loan size of £4m.   The Alternative Term Loan can be used for purchase, refinance and property improvement. Something that should particularly appeal to start-ups is the fact that at Alternative Bridging we can structure our term loans.  They can be structured to match cash flow, including special arrangements for interest to be accrued when the property income is not yet stabilised.

In addition, we take a bespoke approach to every case and, where possible, can offer one-to-one debt servicing ratio cover.

Although there are possible signs that we may have reached a ceiling for interest rates, no one can be sure. In recent months the Bank of England’s Monetary Policy Committee has been split over their decisions to hold rates.  A sizeable minority have voted in favour of further rate rises.   For those without a magic crystal ball, our term loan provides a middle position between a bridging loan and a longer-term lender’s product with ERCs.

With no ERCs, the Alternative Term Loan allows borrowers to take out a loan for longer than a bridge.  They are safe in the knowledge that they can move quickly and without penalty to a longer-term product.   In an uncertain market, such flexibility is vital.