I was recently referred a case by one of our key Business Development Managers. My clients were a self-employed businessman and his wife. They were looking to raise capital against their £1million+ South Eastern home to meet credit commitments and release additional funds to assist with the development of key software to further their business.
Commercial finance is rarely straightforward, but this case was particularly challenging for a number of reasons. Firstly, my clients were self-employed, which tends to raise certain concerns for lenders. However, with a strong track record and close relationships with a wide range of lenders, a good mortgage broker is able to negotiate this.
Secondly, in addition to being self-employed, my clients had also experienced a recent cashflow issue, resulting in a missed payment on their credit history; a blip on an otherwise exemplary credit record.
The final challenge was the primary reason for capital raising itself: the completion of the business software. Even successful self-employed businesses can be notoriously difficult to qualify to lenders – especially if a client’s credit record is not squeaky clean. In this case, the software would take some months to develop and would not produce any immediate returns, something which presented the biggest issue to many potential lenders.
In addition to these challenges, I had to work to a tight deadline because my clients needed to release the finance quickly to avoid defaulting on other commitments and further deteriorating their credit record.
Therefore, my clients were under a serious time pressure, and had three main issues to qualify to prospective lenders: their self-employment; their imperfect credit record; and the inability to specify when they might begin to see monetary returns on their software development.
Using Enness’ reputation and wide range of lenders, I was able to find a lender for my clients that would agree to overlook the imperfection in my clients’ credit record, given their exemplary behaviour until that point. The lender was also willing to take a ‘leap of faith’, with regard to seeing evidence of returns from the investment.
This lender was the correct choice for my client because unlike other lenders, they were willing to provide a 12-month facility and took a relaxed view on my clients’ income situation. They were also satisfied that they would not be able to see evidence of income from the software at the 6 month mark, since it would still be in development. Instead, they took a risk-based approach and agreed to accept a progress report from the client at the halfway point, with room for discussion, should an extension be necessary.
Additionally, having developed a strong working relationship with this particular lender, we knew we could trust them to deliver a quick turnaround. In this case it took only 3 weeks from agreement to completion; a fantastic result for my clients who were burdened with significant time pressures.
The result was a 12 month bridging loan at the rate of 0.89% per month. Suffice to say, this was an excellent result for my clients, who were then able to settle their immediate finances and concentrate on developing the software required to grow their business.