Tag: Bridging Loans (page 1 of 2)

How has the Coronavirus affected bridging finance?

Surveyors are being extremely cautious

Even where a valuation can be done, surveyors are being very cautious. Whilst they will be producing the usual figures for an open market valuation, 30 day, 90 day and 180 day sale, they may also add a revised figure to allow for the likelihood that prices will fall after the pandemic is over.  Some surveyors have even taken to writing, ‘this valuation cannot be relied upon’, on their reports. This makes the report worthless to many bridging lenders, who aren’t prepared to lend on the basis of this type of valuation.

Social distancing causing problems with witnessing legal documents

There are currently problems with getting legal documents witnessed by a solicitor as most are now working from home and not seeing clients face to face. 

Staffing shortages are affecting lenders too

Lenders have also been impacted by the requirement for staff to work from home wherever possible and have had to set up systems to allow staff to work remotely.  

Staffing numbers have been hit by those needing to self-isolate, which has affected lenders’ abilities to deal with new cases.

Bridging Finance during the Covid19 Pandemic

How has the Coronavirus affected bridging finance?

Some bridging lenders have stopped lending

A number of bridging lenders have stopped providing bridging loans during the current Coronavirus pandemic. Many lenders have announced that they are temporarily stopping all new lending or restricting the size and types of loan that they offer.

Some current lending applications have been cancelled

Some lenders have cancelled on-going applications and have even pulled current offers where contracts have not been exchanged.  In some cases lenders are requiring customers to start the application process again from scratch.

Those still lending have reduced loan to values and loan sizes

Those lenders who are still offering bridging finance are being very cautious and have taken actions such as reducing their maximum loan sizes.  Maximum gross loan to values (LTVs) are down from 80% to around 60 to 65%.

Bridging Loans when selling a house – what are the pros and cons?

Pros

  • You can buy your new property right away: You don’t have to wait to get a loan.
  • It gives you time to get a better price on your property: You can avoid the stress of having to sell your property quickly. By taking the time, you may be able to get a better price for your property.
  • Interest-only repayments which are capitalised on your peak debt: Your bridging loan repayments are usually ‘frozen’ during the bridging term until you sell your existing home. You’ll only have to keep paying your current mortgage and not have to worry about managing two home loans.
  • Banks charge standard interest rates: In the past, banks charged a higher interest rate for bridging loans but now there are some lenders that charge standard variable interest rates.
  • The same fees and charges as a standard home loan: Application fees are the same and you don’t have to worry about break costs or discharge fees for paying the loan off quickly. Keep in mind that most lenders won’t generally approve a bridging loan if you’re likely to sell the property in less than 3 months.
  • You can make unlimited P&I repayments: To reduce your interest bill, you can actually choose to make as many repayments on the bridging loan until you sell your property.
  • Avoid the costs of renting and moving twice: Sometimes renting and having to pay for the costs of moving twice may be a better option than getting a bridging loan. It’s important to speak to a qualified mortgage broker so they can help you do the sums to find out which option is better for your situation.

Cons

  • Interest is compounded monthly: Although the interest is capitalised on top of the peak debt, the longer it takes to sell your property, the more your loan will accrue interest. Interest is compounded on a monthly basis.
  • You need to pay for two valuations: This will be a valuation of both your existing property and the new purchase.
  • Higher interest rate if you don’t sell the property in time: If you don’t sell your existing home within the bridging period, a lot of lenders will charge a higher interest rate. Many will also require you to start making principal and interest repayments on the peak debt in order to service both loans. This can cause financial stress.
  • No redraw facility: If you choose to make repayments during the bridging term but need to redraw for any reason, you won’t be able to do so.
  • Normal early termination fees will apply if switching lenders: If your current lender doesn’t offer a bridging loan product, you’ll have to go with another lender that will likely insist on taking on the entire debt (your existing mortgage plus the bridging loan). Because you’re switching lenders, you may be liable for early termination fees and break costs particularly if you’re switching during a fixed interest period.

Bridging Loans: Explained

Selling your home and buying a new property at the same time can be a little tricky.

It can sometimes take a while to sell your home, leaving you without the sales proceeds to buy your new property.

With a bridging loan, you can avoid the stress of matching up settlement dates, move quickly to buy your new home and give yourself more time to sell your existing property.

A stort-term bridging finance is also known as ‘relocation loan’.

Bridging loans explained: How does it work?

A bridging loan is basically finance that allows you to buy a new property without having to sell your existing property first.

Banks work out the size of the loan by adding the value of your new home to your existing mortgage then subtracting the likely sale price of your existing home.

What you’re left with is your “ongoing balance” or “end debt” which represents the principal of your bridging loan. Banks will assess your ability to make mortgage repayments on this end debt.

Lenders use both properties as security and you’ll have one loan (peak debt) to cover both the existing debt and the new purchase.

Between when your bridging loan is advanced until you sell your existing home, most lenders capitalise interest-only repayments on the peak debt which means that you’ll only have to worry about continuing to make principal and interest (P&I) on your current mortgage, rather than trying to manage repayments on two home loans.

After your property is sold, you simply continue to make normal home loan repayments, plus the compounded bridge loan interest, on the new loan.

Small businesses boosted by bounce back loans

The government have announced its intention to offer bounce back loans to small businesses. The key terms of these loans are:

  • businesses will be able to borrow between £2,000 and £50,000 and access the cash within days.
  • loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form.

Small businesses will benefit from a new fast-track finance scheme providing loans with a 100% government-backed guarantee for lenders.

Rishi Sunak said the new Bounce Back Loans scheme, which will provide loans of up to £50,000, would help bolster the existing package of support available to the smallest businesses affected by the coronavirus pandemic.

The scheme has been designed to ensure that small firms who need vital cash injections to keep operating can get finance in a matter of days, and comes alongside the £6 billion awarded in business grants, supporting 4 million jobs through the job retention scheme and generous tax deferrals supporting hundreds of thousands of firms.

The government, which has been consulting extensively with business representatives about the design of the new scheme, will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months.

The loans will be easy to apply for through a short, standardised online application. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.

Farmers cannot be the forgotten heroes of the coronavirus pandemic

The coronavirus pandemic has amplified the uncertainty and fragility of the conditions within which farmers operate.

The coronavirus pandemic has caused us all to become acutely aware of our own mental health, as a “new normal” has emerged. In the UK, there is sharp focus on the mental health of keyworkers supporting the nation in an array of fields such as the NHS, social care and education, but one industry’s contribution that should not be overlooked is the farming and agricultural workforce.

Seasonal labour

Concerns around levels of seasonal labour also predates the pandemic, and concerns have been raised by those within the industry throughout the Brexit debate. UK seasonal farming has been chronically understaffed since the UK voted to Leave and the value of the pound fell. As has been widely documented, an estimated 70,000 seasonal workers are required throughout the year, and around 90 percent of those are from outside the UK. But with restrictions on travel due to coronavirus, farmers in the agricultural, horticultural and dairy industries in particular are reporting severe labour issues.

The Government recently launched its “Pick for Britain” campaign to mobilise a land army of British pickers to help fill farm vacancies. This did not come without concerns from farmers, as many seasonal workers are normally returnees, arriving at the start of the season fully trained in the necessary skills and machinery to hit the ground running. By stark contrast, training new UK recruits can be costly and initially result in lower productivity. Furthermore, recent reports note that, following tens of thousands of initial sign-ups, just 112 people were hired by UK farmers last week. Many applicants cited that they could not commit to the full length of the contract, farms were too far away, or they had caring responsibilities and therefore could not work long hours.

Change in consumer demand 

Changes in consumer demand during the coronavirus pandemic, with a move from out-of-home eating to more meals eaten at home – an estimated 500 million more per week – has resulted in some farmers losing their market overnight. This is down to difficulties in redirecting food produce once destined to the foodservice sector, as it been noted that consumers often wont replicate the meals that they would have had out of home, and there are issues with repackaging foods for retail. The impact on dairy farmers has been widely documented with videos of many having to pour away milk – an estimated 1m litres worth – along with the effects on the meat and horticulture sectors. Further to this, farmers have been faced with an increase in the theft of animals by criminals seeking to “cash in” on public concerns about food shortages.

To compound the challenges, the instruction by government to close B&B accommodation and farm cafés amongst other restrictions, and the subsequent loss in public demand, has also impacted farmers who have diversified their sources of income. These diverse streams of income are often vital to small farms’ survival, as many do not make a profit from their farming activity alone, so the financial consequences of this collapse will undoubtedly impact many in the sector.

Over Half a Million UK Companies in Significant Financial Distress

According to redflagalert, a report has suggested thats:

  • 509,000 UK companies are in significant financial distress—the highest number ever measured.
  • The coronavirus lockdown has seen the largest quarterly increase in the number of businesses in significant distress since the end of 2017, growing by 15,000 companies.
  •  This figure is expected to increase throughout Q2 as COVID-19 restrictions continue.
  • The number of critically distressed businesses increased by 10% in the last quarter alone.

During Q1 2020, the number of UK companies experiencing significant financial distress exceeded the half a million mark for the first time since our research began.

Latest figures show a 3% quarterly increase in the number of companies that are unable to meet their debts—that’s 15,000 businesses, representing the largest increase since the end of 2017.

The leading cause of this is the coronavirus restrictions and our data shows that SMEs have been worst hit, representing over 99% of all businesses in distress.

Companies with less than 250 employees are particularly vulnerable at this time as many have struggled to access government support schemes.

Even more concerning is that our data shows a 10% jump in the number of businesses in critical distress in the last quarter—this is usually a precursor to insolvency.

A recent survey from redflaghalert has suggest that there has been a significant increase in businesses experiencing critical distress; 2,289 companies are now in this category. Between Q4 2019 and Q1 2020, the increases in certain sectors have been dramatic:

  • Bars and restaurants: +37%
  • Real estate and property: +21%
  • Construction: +11%
  • Retail: +8%
  • Manufacturing: +8%

The sectors that have been hardest hit by significant financial distress in the last quarter are:

  • Real estate and property: +6%
  • Hotels and accommodation: +5%
  • Construction: +4%
  • Health and education: +4%

Since 2014, several sectors have had huge increases in the number of businesses in distress. These sectors include:

  • Utilities: +132%
  • Real estate and property services: +104%
  • Sport and health clubs: +86%

Year-on-year, all but one (printing and packaging) of the 22 sectors monitored by Red Flag Alert have seen increases in the number of companies in significant distress over the past 12 months, with the worst affected being:

  • Real estate and property: +17%
  • Sport and health: +8%
  • Food and beverage: +7%

Many businesses are currently not failing immediately because the government support schemes. The suspension of court action has stopped many businesses from also going under. However, this will only be a short-term solution and once things start to normalise again the figures may increase.

Typically, it would be expected that 4.3% of these companies will fail each year not because of coronavirus restrictions, but because they were already at high risk of failure from any short-term drop in revenue and cash flow. However, the impact of COVID-19 will see this figure double and leave the UK economy with insolvent debts totalling £8.6bn this year.

4 signs it’s time to replace your tractor

Is your tractor holding your farm business back? Here are four signs it’s time to replace your tractor.

Whilst a new tractor may be a big expense, using outdated machinery can seriously impact your farm business’ profitability, so it’s important to know the signs that may indicate that it’s the right time to bite the bullet and invest in a new tractor. 

Your business is growing or changing

As your business grows and evolves so will its requirements, and you may find that your existing tractor’s capabilities no longer cut it. If you now have more crops than you used to, you may require a tractor with a higher capacity to get the job done more efficiently and save time and money. Equally, if you have diversified into farming a new crop, you may find that you require a new tractor with different capabilities.

You’ve used it for 12,000 hours

Check how many hours you’ve racked up on your trusty tractor. It is generally agreed that standard-sized tractors have around 12,000 hours of use in them, whilst compact tractors have considerably less. If your tractor has done over 12,000 hours, it could be reaching the end of its lifespan.

It keeps needing repairs

If your tractor keeps breaking down or needing maintenance, this could also be a sign that it has reached the end of its lifespan. Rather than shelling out regularly to have it repaired, it may be more cost-effective to simply invest in a new machine.

It uses old technology

If your tractor uses outdated technology, it could be holding your business back from reaching its full potential. New agritech is being developed at a rapid pace and tractors are constantly being made smarter and more efficient. Investing in a tractor that uses modern technology could help to boost your business’ productivity and profitability. 

If you require help or advice with financing a new tractor, speak to our team here at Richmond Asset Finance. We provide a range of flexible agricultural finance services to help you to grow your business. To discuss your requirements in more detail, give our team a call on 0113 288 3277.

Ideas for supplementing your farm income during the festive season

Cash-in on Christmas by diversifying your farm business during the festive season.

According to NatWest, two thirds of farms have now diversified their business to generate alternative revenue streams throughout the year and boost their income.

Many farms that have successfully diversified report that their additional ventures have become a vital part of their business.

Whilst the winter months are typically much quieter for agricultural businesses, with a little creativity they can offer excellent opportunities for exploring new business ideas.

Here are a few of our favourite ideas for diversifying your farm business during the festive period.

Holiday letting

Many families and friends book holidays and weekends away to meet up and celebrate together over the Christmas holidays. Rather than letting unused land or farm buildings stand empty and unused during the winter months, why not convert them into holiday lettings. This can be particularly lucrative if your farm is in a scenic location.

Grow Christmas trees

Nothing beats the smell of a real pine Christmas tree, and according to the British Christmas Tree Growers Association over 7 million trees are sold in the UK each year. Choose a type of fir tree that will thrive in your farm’s land and soil type and start growing fir trees to sell locally each Christmas.

Run Christmas events

If you’ve got the land and buildings, why not run a series of festive events for the public in the lead up to Christmas? Popular activities and events could include turning a kids’ petting zoo into Santa’s grotto, running kid’s Christmas craft activities or adult wreath making workshops.

Turkeys and geese

Rearing free-range turkeys and geese can provide an additional source of income around Christmas time when demand for high quality meats for Christmas dinner soars.

To find out if you can apply for rural finance to help with your diversification project, get in touch with our team here at Richmond Asset Finance to discuss your plan in more detail.

What to expect from the new John Deere combine harvester

Agricultural tech and machinery company John Deere unveiled details about their new X9 combine harvester at the recent Agritechnica 2019 event in Hanover, Germany.

If you’re thinking about updating your combine harvester and are looking for a state of the art machine that can improve output and efficiency, then you may want to consider John Deere’s new X9 model.

The X9 was designed to help farmers with large farms and tough harvesting conditions to improve efficiency.

John Deere’s product manager Matt Arnold said: “the machine is suitable for small grains crops, pulse crops, canola, high moisture crop, soybeans, anything that’s either tough to thresh, green-stem material, high-material content.”

The company reports that the new model is capable of harvesting more than 100 tons of small grains or wheat per hour, with losses of less than 1%.

To help you to decide whether the new model would be suitable for your requirements, we’ve taken a closer look at some of the X9’s key technical details.

Greater inside width – The X9 is said to have the widest body in the industry, offering larger threshing and separation areas for improved capacity and crop flow.

Optimised chopper – The X9’s chopper is designed to maximise air flow volume and reduce the amount of energy required.

Data tools – The X9 is equipped with a selection of data tools including Operations Center, JDLink Connect and Combine Advisor to improve efficiency and make the machine simpler and more comfortable to operate.

Dual-axial rotor – Improves the combine’s separating ability to reduce density and maximise performance.

The X9 combine harvester is due to go on sale in June 2020.

If you require help or advice with financing a new combine harvester, speak to our team here at Richmond Asset Finance. We provide a range of flexible agricultural finance and asset finance services to help you to grow your business. 

To discuss your requirements in more detail, give our team a call on 0113 288 3277.

How can telematics improve your commercial fleet’s efficiency?

Installing telematics in your business’ commercial vehicles could help to significantly improve your fleet’s performance and efficiency.

Telematics are small boxes that are fitted inside commercial vehicles to collect valuable data and information.

This information can then be used by your business to monitor vehicle and driver performance.

Just some of the information and data that can be monitored using telematics includes:

  • Fuel consumption
  • Speed
  • Driving patterns
  • Routes taken
  • Vehicle performance

You can then work together with your fleet drivers to make changes to the way they work in order to improve performance in several key areas including:

Efficiency – Telematics can be used to help drivers to work more efficiently by choosing the fastest routes and avoiding traffic. A more efficient fleet will also reduce operating costs by increasing fuel efficiency.

Safety – Telematics can help to flag up unsafe driving habits including harsh breaking or accelerating and speeding. Ensuring that your drivers are driving safely can help to reduce costly damage to vehicles and the risk of accidents occurring. 

Vehicle performance and maintenance – Set up your telematics to send alerts about your vehicles’ performance to help you to keep on top of maintenance tasks to reduce the need for repairs and keep your vehicles running smoothly.

Operating costs – By honing driver and vehicle performance using the data gathered by telematics you could significantly reduce your fleet’s overall operating costs. This is achieved primarily by improving fuel efficiency, reducing the number of accidents, and keeping up with vehicle maintenance.

Driver job satisfaction – Telematics provide fleet drivers with the data they need to perform better in their jobs. Providing your drivers with modern telematics technology can help to make their jobs easier and more rewarding, resulting in happier, more productive employees.

If you require financial help or advice with updating your commercial fleet, speak to our team here at Richmond Asset Finance by giving us a call on 0113 288 3277. We provide a range of flexible vehicle finance and asset finance services.

CNG Fuels to provide UK’s HGVs with first carbon neutral fuel

A carbon neutral fuel will soon be available to businesses running HGVs to help them to dramatically reduce their carbon emissions.

Based in the West Midlands, CNG Fuels are the UK’s top supplier of environmentally friendly bio-CNG (compressed natural gas).

The firm recently announced that they would be launching a new carbon-neutral fuel for heavy goods vehicles in 2021.

The new fuel will use manure to produce carbon neutral biomethane. Manure gives off the powerful greenhouse gas methane, but by using this methane as fuel it prevents it from entering the atmosphere.

With HGVs accounting for 4.2% of the UK’s carbon emissions, the introduction of a carbon neutral fuel has the potential to significantly reduce the UK’s overall emissions.

Philip Fjeld, CEO of CNG Fuels said: “We want to help decarbonise freight transport and enable fleet operators to meet net zero targets now, supporting the UK’s climate targets.”

CNG Fuels already supplies many businesses operating HGVs with a renewable biomethane fuel sourced from food waste. The company has become the fuel supplier of choice for several large companies including John Lewis, Hermes, Asda and Argos.

The company reports that switching from diesel to bio-CNG can reduce greenhouse gas emissions by up to 85% and cut fuel costs by 35-45%, making it a win-win for businesses operating HGVs.

CNG Fuels are also developing a network of public HGV refuelling stations on major routes throughout the country to support electric and hydrogen powered HGVs in the future.

Need some help financing new HGVs for your business? Here at Richmond Asset Finance we provide a range of flexible vehicle finance and asset finance services.

For more information or to discuss your requirements in more detail, give our team a call on 0113 288 3277.

What are the benefits of using hire purchase?

Need to purchase an asset, but don’t have the money to buy it upfront? Take out a hire purchase agreement to receive the asset now and pay for it in affordable instalments. 

Hire purchase is a popular type of asset finance popularly used by businesses to buy vehicles, machinery and equipment.

Whilst you are still paying for the asset, the creditor is the legal owner, but once you’ve finished your payment plan it’s all yours.

Here are just a few of the benefits of buying an asset using a hire purchase agreement:

No need to pay a large sum of money upfront– Whilst you may be required to put down a small deposit, the cost will be nothing like paying for the asset upfront. This is particularly useful if it’s a large and unexpected cost, like a vehicle or key piece of machinery breaks down.

Flexible and affordable payments– Hire purchase allows you to spread the cost of the asset over a set period, so you’re paying off a small, affordable sum each month.

Protect your cashflow – Spreading the cost helps you to look after your business’ cashflow. Healthy cashflow is essential for developing and growing your business.

Own the item at the end of the payment plan – At the end of the payment plan, the asset is yours to keep!

Immediate use of the item – You can start using the asset immediately, meaning no expensive downtime whilst you save up the funds.

High quality asset– Many businesses find that they are able to afford vehicles and equipment of a much higher quality and specification through hire purchase than they would have if they were paying upfront. 

Fixed interest rates– Hire purchase interest rates are fixed, meaning no uncertainty on costs, helping you to keep your cashflow stable.

 No VAT on monthly repayments– VAT is paid upfront by you along with any deposit required. You will then re-claim the VAT in your regular payments.

For more information about our hire purchase agreements, or to discuss your requirements in more detail, give our team here at Richmond Asset Finance a call on 0113 288 3277.

More property investors using bridging loans

Recent statistics show that the demand for bridging loans is continuing to grow, particularly in the property investment market.

Whilst property investors may be shunning commercial properties amidst Brexit uncertainty, the market for residential property investment in the UK is still booming.

Recent figures show that investment in UK residential property rose by a huge 150% in 2018.

Tighter mortgage lending criteria has created a higher demand for rental properties. The high demand has caused a shortage of rental properties, allowing landlords to charge higher rent. These factors combined with a slight decrease in property value have made residential buy-to-let properties a valuable investment.

As more property investors seek opportunities to buy properties in the residential sector, the demand for bridging loans has also increased.

In fact, the latest ‘Bridging Trends’ report found that for the second consecutive quarter the commonest use of bridging finance was to buy investment property.

According to the report, 25% of bridging loans were taken out to fund the purchase of investment property, that’s up from 22% in the first quarter. 

Bridging finance is the ideal solution for property investors looking to grow their portfolio as it allows them to move on a purchase quickly whilst the price is low. Without access to a bridging loan it is easy to miss opportunities whilst trying to raise funds.

Here at Richmond Asset Finance we provide flexible commercial bridging loanssuitable for property investment, buy-to-let, and land purchase and development.

For more information about our commercial bridging loans, or to discuss your requirements in more detail, give our team of experts a call on 0113 288 3277 and we’ll be happy to help.

Agroecological farming methods and how to finance them

Agroecological farming methods can increase productivity and help farms to become sustainable.

The farming industry is under increasing pressure to become more sustainable to help tackle the UK’s climate crisis.

Environmental issues that farms contribute to include deforestation, wildlife loss, soil degradation and pollution.

An independent RSA report by the Food, Farming and Countryside Commission has said that the UK must completely transition to a sustainable food system and agroecological farming methods by 2030 or face further climate breakdown and the continued rise in diet-related ill-health.

Agroecology is the science of sustainable farming. Agroecological farming using farming methods that work with and enhance natural and social systems. 

These natural methods can produce healthier, more nutritious food, increase farm productivity, and make agriculture more sustainable and environmentally friendly.

Examples of agroecological farming methods include:

Organic farming– An environmentally friendly method of farming that uses ecological pest control and biological fertilisers instead of chemical pesticides and synthetic fertilisers.

Agroforestry – The planting of trees in and around farmland to look after the environment and improve a farm’s productivity.

Pasture-fed livestock– Livestock that roams freely and eats a primarily foraged diet rather than being fed foods like cereal and soya.

Conservation agriculture– Using farming practices such as crop rotation, cropping system diversity, soil covers, and minimum soil disturbance to manage and protect the soil.

Biological pest control–This agroecological farming practice uses natural enemies including predators and pathogenic nematodes to control pests.

Financing the transition to agroecological farming methods

Within the report, the commission warned that farmers will struggle to completely transition without “stable” policy, regulation, advice and access to finance and innovation.

Here at Richmond Asset Finance we understand the unique financial challenges that farmers face today. We help farmers grow their business by providing flexible agricultural finance and effective farm finance strategies for various sized projects.

To discuss your requirements in more detail, give our team a call on 0113 288 3277.

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