A case study : The merits of bridging finance

Posted by Guelane Mansour on 2nd January 2020 -

One of the recent deals Krios Capital Partners worked can be used as a case study to demonstrate the merits of bridging finance.

The situation:

Our client approached us with respect to the funding of a ground-up development in South London.

He had already exchanged and was due to complete the purchase of the site within 30 days.

We approached one of the development finance lenders who was keen to fund this scheme.

Half-way through the process, the surveyor downvalued the GDV of the proposed scheme leaving the client with an unexpected cash shortfall.

Unfortunately, the client had no additional cash in hand to contribute. He was running the risk of loosing his deposit and, more importantly, the deal.

The solution:

The client had three investment properties in London.

All of them unencumbered and rented out.

Due to the tight timetable, it was decided the best solution would be to arrange a bridging loan secured against these properties.

Serviced interest to maximise the net advance on day 1.

Proceeds were released to the client in 7 days allowing him to top-up the equity required to complete the development finance loan and buy the site.

Key take-away:

A bridging loan can be a very handy financial solution to plug an urgent funding gap.

Bridging finance enables a borrower to unlock the equity currently embedded within a property and fund a new purchase or ongoing working capital.

Completion (subject to the quality of the security & profile of the borrower) can happen in less than a week.

In case you have a bridging finance or development finance requirement, please get in touch with us today.