In the world of professional services there are few more important needs than a quality accountant; however when it comes to adviser relationships with the accountancy profession are you engaged enough with them?
Many advisers of course will already have professional relationships with accountants and apart from offering normal finance advice to their clients, there is a growing opportunity to provide them with access to both bridging and development finance advice. So, why are accountants in such a unique position to have clients who may need such advice?
Well, very often, accountants are able to see the early warning signs of impending problems with either individual clients and/or their businesses. For instance, successful businesses can be guilty of overtrading, trying to fulfil more orders than they have the resources and cash to cope with. Businesses can build up too much stock, tying up their capital, and making them vulnerable to insolvency where they are unable to make payments.
A good accountant will look to recommend measures such as regular invoicing and chasing of debts and possibly sale and leaseback or factoring. It may however be that a swift injection of cash is the best solution for fast-growing businesses however and this is where bridging finance can come in.
For those businesses where sadly the options have run out and a fast sale of the business is required, bridging finance can also be coupled with a conventional bank loan to provide a funding solution for a potential new owner. Bridging can also be used to fund a lease extension – the value of the property, assuming the lease extension has been done, is drawn down on the agreement that the lease extension will be actioned simultaneously. Business owners with equity in their own home or rental portfolios can apply subject to circumstances and criteria as a first-charge. Second-charges are also available.
The key point to remember is that there is not a black and white list of criteria in order to know straight away which lender will be happy to arrange the loan. Every case is judged on its own merit and lenders aren’t ‘adverse to adverse’ however they will not provide bridging finance for a bankrupt. Terms issued by a lender on an adverse case will normally state that the adverse must be cleared from the capital being raised.
Unlike high-street lenders, bridging lenders aren’t as interested in the borrower as they are in the security/asset acting as security and the exit strategy, i.e., how the debt will be repaid at the end of the 12 to 24 months’ term. A property is a good asset, be it residential or commercial, freehold or leasehold, but can it also be the land itself. For leasehold premises we are looking at a minimum lease term of 70 years unexpired.
The reason behind the funding requirement must be justifiable and make sense in order to get terms agreed. It’s why specialist operators like ourselves exist so by coming to us with all the facts in the first instance we can assess the case on its lending potential and aim to get indicative terms issued for the client(s) to look over within an hour or two of the initial enquiry. A request for a soft credit search is always made before issuing terms to make sure that the terms that offered are realistic.
One word of warning – don’t make the mistake of dealing with a master broker who doesn’t specialise purely in bridging and development finance. Many a time we have business from brokers whose relationship with a client has been ruined by an urgent funding requirement having been badly handled as a result of renegotiation or having to be re-placed to an alternative lender resulting from poor placing and a lack of understanding of a lender’s requirements at the outset.
So as you can see there are lots of opportunities where accountants could be recommending advisers to source bridging finance for their clients. Remember, when you are speaking to an accountant at a networking event or about your own accounts, don’t forget to mention bridging and how you can access this niche area of funding.
Jonathan Caplan is director of First 4 Bridging