It's best to look for other sources that can help you reach your business goals, so take a look below at some of the alternative methods of fundraising you can do.
Consider the Assistance from Angel Investors
These retired business gurus or successful entrepreneurs can be your ticket to salvation when you need funding. They are people who take a keen interest in your work and activities, making them huge supporters who want you to succeed and grow. Also, they can offer their advice and business expertise to make you a better player in the market.
Not your Average Loan
When people think about loans, they consider personal or business ones, but no one would ever expect to get funding from your inheritance money. Some owners have a lot of money coming in but the probate process gets delayed and drags. That's why loans for heirs can be very appealing when you want quick funding for your startup or company. You get a considerable amount of the money entitled to you, and you can pay the debt off when the courts finally issue your money.
Have You Thought About Crowdfunding?
This is a good way to utilize the digital world to your benefit. There are several reputable platforms with different investors that can provide you with the money you need if your business activities pique their interest. Countless investors are on the lookout for decent companies that offer something special and useful to the community, so investing in your company can be beneficial for them, too.
So, if you are looking for such crowdfunding, arrange a Meeting of investors and venture capitalists at a club. This will be really fruitful for you
You Could Go for Factoring and Invoice Advances
This can be very handy when you find a provider that can front you some money on the invoices that you’ve already billed out; it's good for companies that constantly provide products and services to customers, and you will pay it back once your customers have paid the bill in full. It's a simple method that keeps your business running and projects operating without waiting for long periods of time for consumers to pay up.
Consider CDFI Assistance When Nothing Else Works
This stands for Community Development Finance Institutes. They are private financial organizations that deliver affordable lending options, making it very easy and advantageous for many businesses that are in need of quick funding to save them from tight situations. Many businesses don't get a chance to thrive or grow because of restricted money-raising methods, so this can be the answer to their capital needs to fund their business.
Managing your finances can be a little tricky, but with the right mindset and the willingness to find better and reliable sources for funding, you can make a huge difference in your company's success. You can't just sit there and wait for your company to crumble; choose the right path for you and get the best funding that suits your needs and goals.
But what exactly are MCAs? And what are the pros and cons for business owners looking for a quick cash fix when facing cash flow difficulties? Michael Foote, Managing Director at Quote Goat, answers these questions below.
MCAs explained
Merchant or Business Cash Advances are advance payments made to a business in exchange for an agreed percentage of future sales through credit or debit cards.
More suited to businesses that take a reasonable proportion of their income through credit or debit cards, a Merchant or Business Cash Advance is considered a short-term, unsecured business loan based on future sales.
In agreeing to a Merchant or Business Cash Advance, a business effectively sells a proportion of their future sales or income in order to receive a large cash sum to aid increased cashflow.
A Merchant or Business Cash Advance is considered a short-term, unsecured business loan based on future sales.
Pros
Compared to conventional business bank loans, Merchant Cash Advances come with a host of benefits to businesses in need of additional cash:
High approval rate: Merchant Cash Advances have a typically high approval rate when compared to traditional bank loans, meaning younger businesses who often struggle with cash flow are more likely to benefit as a result.
Speedy cash injection: Once a loan has been approved, Merchant Cash Advances have a quick turnaround, where businesses are normally in receipt of their requested cash injection within 24 hours.
No interest rates or APR: Compared to conventional bank loans or other means of business funding, Merchant Cash Advances have zero interest rates, providing a more manageable loan option for both small businesses and start-ups.
No fixed payment amounts: Unlike other business loans, Merchant Cash Advances operate on an agreed percentage as opposed to a fixed payment, where the business in receipt of the loan pays a daily percentage on the sales received. This means that during quieter sales periods, the business does not struggle with the return of high loan payments.
Cons
Shorter payment terms: The payment terms offered through a Merchant Cash Advance tends to be shorter than conventional business loans. Therefore, it is important for the recipient to be as accurate as possible when forecasting future sales to ensure the loan can be repaid in full within the given timeframe.
Not suitable for all businesses: If your business does not receive payments through either debit or credit card, or only a small percentage of sales are received through cards, then it is unlikely that you will be able to receive a sizeable loan amount compared to alternative options.
To find out more, visit: https://www.quotegoat.com/business-finance/merchant-cash-advances/
According to Dominic Buch, Co-Founder and Managing Partner at Caple, in order to support that growth, many CFOs will be expected to examine and recommend suitable funding solutions.
Finding an appropriate form of finance is more complex than it used to be. For most of the twentieth century, business lending was based on the value of a company’s assets such as property, stock or invoices.
To help firms access funding, finance directors have therefore developed a good understanding of how lenders would assess their company’s physical assets.
However, today, companies are more likely to be investing in intangible assets such as data, software or a strong brand than tangible ones.
This investment in intangible assets has spurred growth and innovation. But using them as collateral to borrow against remains difficult. Although value is built in intangible assets, finance is raised against tangible ones.
Without a new approach to funding, finance directors, especially in asset-light sectors such as professional services, technology or media, may struggle to find suitable funding for their business.
The growth of the intangible economy
As most finance directors would recognise, companies now build and grow through investment in intangible assets, alongside a continued focus on human capital.
We can see this from the businesses that succeed today.
Airbnb is valued at $35bn because of its network and data, not because it owns apartments. Google has become a global behemoth because of its algorithms.
These companies are valued so highly because of their intangible assets, including the skills of the people that develop them.
The same is true of many smaller but growing businesses too. Service-based businesses contribute around 80% of UK GDP and more than £160bn in annual exports.
For instance, growing financial firms, technology companies and media businesses rely on intellectual property and brand to stand out from their competitors.
But because financial standards have not kept pace with these changes, finance directors may struggle to accurately value their asset and their business.
The challenge accessing capital
Intangible assets present a challenge to traditional lending models based around recoverable security such as property or machinery.
If a company with physical assets goes out of business, a bank can recover its money by selling those assets. Lending decisions can therefore be centred around the value of the assets, rather than the performance of the business.
Intangible assets are less transferable, they cannot easily be recovered and sold to a new owner.
As a result, businesses with intangible asset bases find it more difficult to access debt finance, regardless of the strength of its operations and the associated cash flows.
When asset-light service-based businesses sector are such a vital part of the UK economy, this puts a brake on growth.
How unsecured lending can help
Traditionalists will say equity funding through venture capital or private equity is the solution. Often that holds true.
However, as finance directors will know, third party investment, does not suit every sector, firm or business owner. It also dilutes ownership.
Instead, asset-light companies can now benefit from unsecured lending, based on an understanding of the future cash flows generated by the business, rather than the value of physical assets.
Working with external advisers such as an accountant or business advisor, finance directors often play an important role in helping their business access the right funding.
Both by identifying suitable lenders and in supporting the development of the forecasts and business plans central to a credit process based on future cash flows.
When expanding businesses are important for both jobs and growth, we need to do all we can to help fund them.
We need a new approach to lending where finance directors can help their firms access the right growth funding for them.
They deem it to be a “high risk” product and have recommended limiting P2P lending to 'sophisticated investors’ only. Below, Finance Monthly hears from Frazer Fearnhead, CEO at The House Crowd, on why we shouldn’t’ be restricting P2P lending.
This is likely off the back of the recent collapse of mini bonds provider London Capital & Finance, which persuaded customers to invest in bonds (with a ‘fixed’ 8% interest rate) that weren’t ISA eligible. Sadly, some 14,000 people have lost most of the £214 million they had collectively invested. This has, understandably, increased regulatory scrutiny of similar products marketed to retail investors.
Nonetheless, the FCA is lumping all P2P lending companies in with London Capital & Finance, which is patently unfair. The company marketed a product as an ISA, but wasn’t one at all – it was a mini bonds investment – so we’re not even talking about comparable products here. Plus, it obviously wasn’t acting in a regulated fashion and, as a result, it’s a knee-jerk reaction to lump the whole P2P industry together with it.
Democratising investment options
Peer to peer lending, including products such as IFISAs, allow everyday people to access the sorts of returns that only high-net-worth and experienced investors historically had access to. Restricting this offering (or warning people away from it unnecessarily) would deal a big blow to the P2P lending industry and defeat its key objectives – for borrowers, to democratise access to finance and for investors, support the ability to lend in return for a better rate of interest.
Why should investments with higher interest rates be reserved only for experienced investors or those who already have significant capital? It’s precisely the savers who are working to build up a nest egg for their futures who should have such opportunities, especially since lending is much easier to understand than more complex investments. If they’re only left with options like cash ISAs (which won’t necessary beat rising inflation), they won’t be able to do it.
Why should investments with higher interest rates be reserved only for experienced investors or those who already have significant capital?
The FCA said that “anyone considering investing in an IFISA should carefully consider where their money is being invested before purchasing an IFISA.” Of course, this is still true – all investments should be carefully considered before they’re undertaken. But that doesn’t mean that we should completely rule out one of the most accessible investments available on the market today.
P2P is a diverse landscape
Another issue is that, at the moment, it seems the FCA can’t (or won’t) distinguish between different types of P2P loans with different levels of security. It’s true that many providers offer unsecured loans, but there are others that do offer more security. Lending can be secured against an asset which helps to mitigate the risk of the borrower defaulting, as a legal charge over the asset can force its sale and regain investor capital. Other lenders also operate a ‘provision fund’ as an additional security measure.
The FCA has previously warned of introducing ‘appropriateness tests’ in order to restrict who P2P lenders can market their products to, but the problem with this lies in conflating products that are in fact very different from each other. Not all P2P lending products are the same – levels of security do vary by provider, but if the right due diligence is conducted and processes are put in place to mitigate risk, they can offer consistency and reliability. Similarly, we should not look to compare, for example, a stocks and shares ISA with an IFISA. They are fundamentally different – and, arguably, the IFISA can be a safer option.
Ultimately, there are risks involved in all investments, but the answer isn’t in scaremongering. Appropriate education and transparency is what we need to get people investing their money wisely in a variety of options, and we would like to see the FCA do more to support this.
Bridging loans can pretty much be used by anyone that needs to make a purchase in a short amount of time. However, here are just five of the most common reasons as to why an investor may need a bridging loan:
Chain Break Finance
It isn’t uncommon for a property chain to break in one of the final stages of a transaction, and it can be incredibly annoying for the investor or developer involved. A bridging loan, also known in this case as ‘chain break finance’, can be used to cover your finances while you find a new purchaser for your property.
The sale of the property will therefore continue to go ahead. Without a bridging loan, the purchase of that property would have fallen through completely.
Property Auctions
Some property investors visit auctions not expecting to purchase anything at all, and therefore won’t have any funds sorted prior to visiting. However, if a great opportunity arises at an auction, it would be a shame to have to let it go to someone else. This is again where a bridging loan comes in useful.
Property Refurbishments
Most mainstream lenders refuse to lend to investors that are developing a property that isn’t really in the best condition. However, bridging lenders (also development finance brokers) consider both the future value of the property, as well as the overall ROI, and make their services readily available as they will be able to see the benefit.
If you’re interested in purchasing an abandoned property, then it might be worth checking out this post first for some handy advice.
Property Conversions
If someone is in need for some quick funding in order to finance the conversion of a property or maybe even add an extension, then a bridging loan could be used for this.
Business Funding
Bridging loans can cover everything from initial business establishment costs to unexpected shortfalls, and even urgent tax payments that may be required, and this can often be a life saver for most business men and women who need to pay large sums within a short amount of time.
If you think that you fit into one of the categories above, and you’re in need of bridging finance, then get in touch with a reliable independent finance broker, such as Pure Commercial Finance, who will be able to help.
Investment loans, for example, would turn into profits in the near future while bad loans would result in recurring debts, bad credit score and higher interest rates. Car title loans are some of the popular personal loans sourced from private lenders as opposed to traditional sources such as banks and cooperatives.
More often, lenders financing, car title loans would need the applicants to undergo some credit check. While this is a crucial stage in any lending business, the procedure sometimes spoils the only chance an applicant had in order to acquire the so-much-needed money. In the tight economy, car owners who opt for the car title loan usually have a poor credit score with the other lenders and the only way to obtain a loan is to use their car title as security.
Over the years, car owners wishing to obtain a car loan, often don’t want to go through the credit check process since it can worsen their credit score. This has resulted in a friendlier way of obtaining loans without risking their credit reputation. Certain lenders give title loans with no credit check where car owners have to submit a few documents for consideration. Some of the most important aspects used by such lenders to evaluate the applicant’s ability to repay the loan are the presence of a steady income stream and the vehicle’s value.
Listed below are some tips that can help you decide, if you want to get a title loan or not.
Is it a good or bad idea?
This is a simple question with a straightforward answer. It depends on your urgency and of course the condition you’re in. Everyone at some point in time undergoes some financial emergencies such as paying hospital bills, overdue debts, etc. Taking a reasonable instant loan you can get is probably a good idea and a solution to such financial constraints.
A car title loan with no credit check will come in handy if you’re in need of some quick cash without ruining the already-damaged credit reputation. Since banks and cooperatives won’t buy your idea of borrowing a loan with poor credit, the only good idea is the no credit check car title loans. Again, going for a loan to fund some luxuries is a bad idea. Car title loans may come with slightly higher interest rates and you don’t want to pay such interest after funding some mediocre causes.
Requirements for the no credit check car title loans
When you’ve found a car title lender giving no credit check car title loans; you’ll be required to have certain documents with you. These are:
- Car title
- Government Issued Identification document
- Proof of residency
- Proof of income
- Proof of current vehicle insurance
- Personal and professional references
When no lending company would listen to your stories, the only way out of financial shortages is to use the resources you already have with you. Your vehicle is an important asset during such times and you can use it to your own advantage. Regardless of the existing credit score, the no credit check car title loans give you a chance to redeem your hopes without having to beg for what you deserve.
You came to the right place. In this article, we will see how to apply and secure a personal loan.
What to Do Before Applying for a Personal Loan
1. Check Your Credit Score
A higher credit score will make it easy for you to get a loan. If your credit score isn’t good enough, then take steps to increase it before applying for a loan.
You can get a loan with a low credit score but at a higher interest rate.
2. Consider Different Lender Options Online
People usually go to banks to take a loan. Since the banks would be aware of your financial credibility, they would be flexible in offering you a loan.
However, you can also consider other lenders and any Non-Banking Financial Company (NBFC). Verify their credibility before approaching them. Check for loan costs, interest rates, terms and tenure.
3. Compare the Interest Rates
Shop around to check what interest rates different lenders are offering. Compare the loan amounts and the required monthly payments too. Some financial institutions may offer you an unsecured personal loan while a local bank may offer better interest rates.
Apart from comparing personal loan interest rates, check what other charges you may have to bear. These may include processing fees, payment penalties, and foreclosure charges.
4. Check your Eligibility
Banks or other lenders require you to be salaried or self-employed to be eligible for a loan. You should be in a particular age bracket as well.
5. Check the Documentation Required
Check all the documents you require to apply for the loan. These may include your recent payslips, letter of employment, current address, photographs, etc.
6. Choose the Appropriate Lender
Choose a lender who gives you a flexible tenure and different EMI options to pay off the loan. Use an EMI and personal loan interest calculator online to estimate your monthly cash outflow.
7. Read the T&C Document Carefully
Make sure you understand all the terms and conditions before you apply and secure the loan. If you have any queries, ask the lender immediately.
Once you complete the above-mentioned steps, you can apply for the loan – either online or through the financial institution’s app.
How to Apply for a Personal loan
8. Online Application
- Fill up the Form
Fill up the online form and upload all the required documents. In this step, you need to mention:
- Desired loan amount
- Contact details
- Email ID
- Get Instant E-approval
This is the stage when all the documents will be verified. The financial institute will check whether you are eligible for the loan or not. Once all the documents are verified, you will get an instant e-approval.
- Loan Disbursal
After the verification, the loan disbursal process will be initiated. You will have to e-sign the loan agreement document. By doing this, you agree to abide by the terms and conditions of the lender.
Once you e-sign the document, disbursal process will be started. Provide your bank account details where the loan amount will be disbursed.
9. Requests through E-mail or Phone Banking
Leave a request for a personal loan with the bank either through the customer service centre or an e-mail. The financial institute will review your eligibility and contact you to take the process ahead.
10. Offline Request at the Bank
If you don’t want to go the online route, go to the nearest bank of your choice. Talk to a relationship manager and request a loan.
Getting a personal loan has become a very simple process. You can use instant personal loan apps and have the loan amount in your bank account in no time.
The comments from Zahid Aslam, Managing Director of Investment Banking at Dalma Capital Management Limited, come as the firm reports an almost one-third jump in enquiries regarding Sharia-compliant bond issuances from corporations outside of the GCC.
The news follows S&P Global Ratings predicting in January the global issuance of Sharia-compliant foreign and local currency bonds is expected to reach as much as US$115 billion (Dh422.1bn) this year.
“It is our experience that sukuk-based solutions are establishing themselves as an increasingly attractive alternative for the funding of infrastructure and development projects,” observes Mr. Aslam. “For example, we are currently working with clients on a variety of ‘off the beaten path’ projects, including a refinery initiative in the CIS region and a scheme to help develop eco-tourism and sustainable farming in several African nations. We are also seeing interest from Malaysia, Indonesia and Pakistan.”
He continues: “I would suggest that there are five main drivers for this significant upward trend for sukuk-issuance to continue this year and beyond.
“Firstly, lower oil prices – despite recent gains – have created a funding shortfall for many.
“Secondly, there is notable and mounting pressure on global liquidity.
“Thirdly, the US Federal Reserve’s ongoing plans to slowly raise interest rates, making borrowing more expensive.
“Fourthly, global regulation is enhancing and becoming more Islamic finance-friendly.
“Finally, general awareness outside the GCC of the uses and benefits are becoming ever-more understood and valued. Dalma Capital, being a licensed and regulated asset manager and investment boutique with a network of institutions and accredited partners, provides all the necessary solutions for sukuk issuers and investors.”
Zachary Cefaratti, CEO at Dalma Capital concluded: “There is growing evidence that potential borrowers who had never considered Islamic Finance are better understanding the clear benefits of such solutions.
“This is cemented by the fact that deals can be structured to be project based, not centred solely on the credit standing of the borrower. Numerous virtuous aspects of the nature of Sukuk will continue to bolster their prevalence in capital markets globally.”
(Source: Dalma Capital)
Below Steve Noble, COO at Ultimate Finance, offers insight into the potential changes ahead and the way these will impact business and financing.
Ongoing Brexit discussions may mean it seems much longer ago, but in November both Houses of Parliament passed legislation to end Bans of Assignment contractual clauses. This is great news that lenders and SMEs will have been celebrating since the announcement was made.
What’s the problem with Bans on Assignment clauses?
Bans on Assignment often blocks the provision of vital funding to SMEs as some financiers are hesitant to supply this where clients and their customers have agreed a contract containing this type of clause. If the financier IS prepared to provide funding, they will either have to find a workaround – such as requesting that the business approaches their customer for consent –or request additional security from the client. Each of these options proves time consuming, incurs unnecessary costs and makes it difficult for clients to obtain invoice finance. Unsurprisingly, this can cause SMEs to either struggle on without the support they need or rely on alternative finance options that aren’t right for their business.
What does the change mean?
This means that from 2019 SMEs will be able to access the funding they need more easily. It’s why I’m welcoming the news that after two previously unsuccessful attempts, Bans on Assignment clauses are now null and void in England, Wales and Northern Ireland. SMEs will therefore be able to assign receivables to invoice finance providers without having to spend time and money seeking consent from customers or trying to find workarounds to these clauses which can make things unnecessarily complex.
The legislation also makes clauses prohibiting a party from determining the value of a receivable and being able to enforce it ineffective. Again, this will increase the appeal of invoice finance for so many SMEs across the country.
Does the regulation impact your business?
Clearly, this is great news for SMEs and funding partners across the country. However, there are still caveats in place which will inevitably frustrate some.
- The regulations apply to contracts entered into on or after 31 December 2018
- They do not apply to receivables due to be paid to large enterprises – traditionally defined as businesses with more than 250 employees – or special purpose vehicles
- They exclude certain contracts from the scope of the regulations, for example those relating to land and for the provision of financial services
- They only apply to contracts governed by the laws of England, Wales and Northern Ireland
The final point will likely prove the most frustrating, as the current legislation doesn’t change anything for more than 345,900 SMEs in Scotland, leaving them to potentially continue struggling to gain access to vital funding next year.
Hopefully this won’t be a permanent issue however as the Scottish Government may follow in the Central Government’s footsteps and announce similar legislation to ensure SMEs north of the border aren’t at a disadvantage compared to the rest of the UK.
Onwards and upwards
Despite the caveats, the news that Bans on Assignment clauses will soon be a thing of the past is great news for SMEs and lenders alike. This should result in a simplified invoice finance process and therefore more small businesses gaining access to the funding they need to continuing thriving in 2019. If that’s not good news, I don’t know what is.
Proskauer and Grimaldi Studio Legale have represented funds managed and advised by BlueBay Asset Management in the €135 million financing provided to DADA, one of the leading names in the European domain and hosting segment. Proskauer and Grimaldi Studio Legale advised BlueBay as bondholder and Linklaters acted as English & Italian counsel to the company.
DADA is a pan-European online hosting business headquartered in Florence, Italy and it is majority owned by Hg Capital. Hg acquired a majority interest in DADA in October 2017 and bought out the remaining shares by way of a tender offer in February 2018. The debt financing was provided by BlueBay by way of an Italian mini-bond.
The Proskauer team was led by Partner Ben Davis and included Associates Harriet Roberts and Jessica Donnellan (Private Credit). The Grimaldi Studio Legale team was led by Partners Riccardo Sallustio and Giacomo Serra Zanetti, who were supported by Associates Irene Amodeo, Federico De Pascale and Giulia Gambarini. Tax Partner Carlo Cugnasca assisted with tax matters.
New research from eFront shows that while the 1990s might be thought of as a “golden era” for venture capital, returns figures do not back this assumption up.
- Conventional wisdom has it that in the decade 1990, returns of venture capital funds were higher and cash was returned faster.
- The decade 1990 can indeed be singled out for its shorter time-to-liquidity, but not for its higher returns.
- The 1990s recorded an average time-to-liquidity for US early-stage VC funds of 3.62 years, compared with 6.7 years for the 2000s.
- Returns (TVPI), meanwhile, stood at 1.1x for the 1990s and 1.57x for the 2000s.
- The figures for European early-stage funds were similar, with holding periods of 3.7 years and 6.9 years in the 1990s and 2000s respectively. Returns were just 0.96x for the 1990s and 1.56x for the following decade.
- A more detailed analysis shows that there are in fact three successive and distinct periods in the decade of 1990, which marks a transition for venture capital.
Analysis
Were the 1990s the golden decade of venture capital? Listening to veteran investors of that time, it would be easy to conclude positively. In collective the memory, that decade remains associated with high VC fund performance, meteoritic entrepreneurial successes and a certain ease of doing business. Fast-forward to today, and VC fund managers complain today of high levels of competition and high valuations of start-ups.
Conventional wisdom is right on one point: that the 1990s can be singled out. But this is because of a much shorter time-to-liquidity that seen before or since. The 1990s recorded an average time-to-liquidity for US early-stage VC funds of 3.62 years, compared with 6.7 years for 2001-2010. However, overall performance for the decade does not look particularly good, with funds returning just 1.1x, compared with 1.57x for the 2000s. If a few vintage years made a strong impression on investors, the overall decade appears as fairly poor in terms of pooled average total value to paid-in (TVPI).
Figure 1 – Performance and time-to-liquidity of US early-stage VC funds, by decade
Beyond the aggregate figures, a more detailed analysis by vintage years shows that there is a tale of three successive and distinct periods in 1990: one with high TVPIs and short time-to-liquidity in 1993-1996, then one with low TVPIs and short time-to-liquidity in 1997-1998 and a final one with negative returns and long time-to-liquidity in 1999-2000. Therefore, more than a golden decade, the 1990s appear as a period of transition.
The following decade is more consistent over time both in terms of seeing fairly high TVPIs of 1.5 to 2.5x (except in 2001) and a longer time-to-liquidity (4.8 to 6.4 years).
Could this be a US-centric phenomenon? Looking at Figure 3, the answer is negative: the picture is rather similar for Western European VC funds. European early-stage funds saw time to liquidity of 3.7 years and 6.9 years in the 1990s and 2000s respectively, while returns were just 0.96x for the 1990s and 1.56x for the following decade.
Figure 3 – Performance and time-to-liquidity of Western European early-stage VC funds, by decade
Thibaut de Laval, Chief Strategy Officer of eFront, commented:
“A few exceptional years have marked a decade and an asset class. The venture capital boom years of the decade 1990 have left investors with the wish to see them happen again. The analysis of that decade has shown that indeed it was unusual, not because of overall high TVPIs but mostly due to shorter time-to-liquidity.
“Said differently, the vintage years associated with the subsequent stock market crash have wiped out a significant part the overall outperformance of the decade. In that sense, wishing to return to the ‘golden years’ bears the risk of calling as well for a performance bust. The following decade, still partially in the making, contrasts with the 1990s in surprisingly positive ways.”
(Source: eFront)
When it comes to buying a property, UK homebuyers may rely predominately on mortgages and cash payments, but their knowledge towards other financial products is limited, new research by Market Financial Solutions (MFS) has revealed.
The bridging lender commissioned an independent, nationally representative survey among more than 2,000 UK adults to uncover just how Brits have been financing their property purchases. Of those who have bought a property since 2007, 42% identified as cash buyers while a further 52% said they had used a mortgage or re-mortgage.
Taking into account the rise of the UK’s alternative finance industry – currently worth over £4.6 billion – the research also revealed a noticeable uptake in products outside of mainstream loans. Nearly one in five (19%) homeowners said they had used a form of alternative finance, ranging from crowdfunding to mezzanine finance and unregulated loans, with this figure rising to 29% among respondents aged between 18 and 34. Meanwhile, 13% of homebuyers said they had used a bridging loan – this number increased to 21% for those who were investing in a second home.
Deciding on how to finance a property purchase can seem overwhelming given the number of loans and products currently available in the UK. As a result, 37% of homebuyers have relied on a broker to help them find a financial product best suited to their needs.
However, MFS’s research also showed that the reliance on mortgages and cash payments was partly due to a lack of knowledge surrounding other available finance options. Reflecting the competitive nature of the country’s property market, nearly a quarter (24%) of buyers said they would have liked to have considered other financial products but feared they would lose out on their property purchase if they delayed their credit decision. Delving into awareness of specific alternative finance products, nearly half (49%) did not have a strong enough understanding of bridging loans or the situations in which they can be used.
Paresh Raja, CEO of MFS, commented on the findings: “Mortgages have long been the go-to method for financing a house purchase in the UK. But over the past decade, a range of new alternative finance products has arisen to give buyers different options that might be better suited to their needs. However, today’s research demonstrates that there remains a lack of understanding about what these options are and how to use them.
“From crowdfunding platforms to raise a deposit, through to bridging loans to buy a property at auction, there are many opportunities now accessible for those needing to access credit, and to remain reliant on the mortgage market could restrict an individual’s ability to get the funds they need. Indeed, in the UK’s competitive property market, it is essential that buyers are aware of the financial products they can choose from, in turn putting themselves in the best position to progress with a purchase quickly and efficiently.”
(Source: Market Financial Solutions)
