Your Property Requirements, and Our First Assessment

 

As soon as a client or introducer starts to relay to us the details of property requirements, the cogs start to whirl as we assess where the property sits with lenders’ criteria – and we aim to quickly arrive at whether your expectations of the requirements can be matched with what they are eligible for.

We don’t make any ‘decisions’ about direction for you; we are here to ensure that you are aware of what options you are eligible for, and to help you achieve the best outcome for your requirements.

Investment Property – The ‘Slam Dunk’

This point scoring analogy on either Residential or Commercial investment properties not aimed so much at the requirements being ‘easy’ to complete for you - it’s property, there are always wrinkles to iron out.

The ‘Slam Dunk’ refers to the fact that you are presenting a property that is either already occupied by tenants, or is ‘tenant ready’ with the ability to have tenants sign leases or ASTs on completion.

Tenant ready? As part of the lender’s valuation the surveyor will report on the condition of the property and confirm that it is habitable, and ready to generate income to service the mortgage from day one.

Our first assessment is listening out for the properties where the client approaches us for a long-term mortgage, but where the tenants won’t be able to rent from day one, and so rental income won’t be there to service the mortgage.

Investment Property – ‘A Lick of Paint and New Carpets’

We want to understand the degree of work that will be needed to maximize rental income and yield for the client – and in some cases a property may present as ‘tired’ for prospective tenant, and require ‘freshening up’ before being let to ensure it achieves its income potential.

Where works are really concentrated on condition, presentation and decoration – covering for example bathroom suite, kitchen, decoration and flooring – we have options where a long-term mortgage lender can consider a short up front period to carry these works out.

We work with a Buy-To-Let mortgage lender for example that can allow a 3 month up front window post-completion for such light works to be carried out – with a limit of 10% of the purchase price to be spent on them. You would have to provide the schedule of works to the surveyor when the initial valuation is done for them to report on to the lender.

But where the works are so light is could be a viable option to avoid the need for a separate initial short term funding product to be put in place.

Owner-Occupier Commercial Property – The ‘Short, Sharp Refurb’

As above with investment properties, trading businesses can come to us with a current property that they lease or own, and with a requirement to purchase new premises to operate from.

Many sectors can require premises to be fitted out or refurbished to suit their operating requirements – from a hairdressing salon to a logistics or warehouse operator.

We have worked with clients and lenders to agree a short up front ‘cross over’ period where their new operating premises is refurbished and fitted out while they still trade from their current premises.

The outcome for the client is continuity in trading, and so long as the requirements are signed off as viable in a short timeframe at the point of valuation, lenders can be amenable to this.

The Refurbishment Property – “It Just Needs XYZ and We Can Be In There”

An extremely common catch for us in first assessment – far more common than you might think – would be that clients approach us for a long term mortgage on a property that is not habitable for their purposes on day one.

This includes owner-occupier Commercial properties, or Residential and Commercial investment properties.

Clients may not be aware that lenders won’t lend a long-term mortgage where income is not available on day one to service that mortgage from a lease or AST that they can see and understand during underwriting – and they ensure that it is all confirmed to them at the point of valuation.

The solution is for the client to put in place short-term finance initially – Bridging Finance – and then refinance with the long-term mortgage as the exit to that initial loan.

Bridging loans can be used for a varying degree of refurbishment or conversion work on properties – and different lenders will support varying funding, from purchase only to including the full cost of the works:

• Light Refurbishment - Cosmetic refurbishment with no structural changes
• Heavy Refurbishment - Contains cosmetic work, but usually renovation work including structural changes or changes to the property footprint
• Ground Up Development - Commonly starts from vacant land, can include demolition and rebuild

 

Our assessment of your requirements starts with what products or lenders you are eligible for, and we then look to source options that provide the best outcome for you and your property.

Why don’t you talk to us about what more there is than meets the eye with your residential or commercial property – and how we can help you to fund it?

Mark Grant, January 2022.

mark@fiduciagroup.co.uk

Could Your Business Recover Quicker or Grow More With Same Day Payment Terms?

 

As you plan for 2022 and beyond, what will allow your business to recover quicker or grow more moving forward?

Are you resolving to ease the cash flow pressure on your business in 2022? How much pressure would be lifted on your working capital if you could close the gap between paying your overheads, wages, contractors etc and actually getting paid yourself?

How much more time would you have to get on with running your business, instead of juggling your business’s finances?

If you provide payment terms to your customers, then you could be operating in some senses by watching the calendar for when your invoices are settled.

How many more opportunities could you take on NOW if your business operated on SAME DAY payment terms with your clients?

Cash flow or working capital, however you want to term it, is what allows your business to operate, trade and essentially exist. That sounds like an over simplistic statement, but the reason why companies use cash flow forecasts is to stay one step ahead in ensuring the flow of cash in their business.

Cash flow provides for a wide range of purposes such as wages, fixed overhead costs, paying suppliers and increasing or diversifying your activities as business conditions dictate – or opportunities present themselves. When cash flow dries up, your trading activities can cease up, and this can prove terminal.

Even if your company has not been directly impacted by the pandemic, and suffered lower sales, productivity or even a forced closure, it is highly likely that through your supply chain, staff or customers you will have felt the effects in your cash flow; virtually no business has remained directly or indirectly unaffected.

And even in the extended periods since last April when we may have felt that ‘normality’ was on the horizon, other factors such as the global supply chain crisis, labour shortages and price inflation have impacted the majority of companies in the economy.

In the current economic environment it is very easy for you to become the ‘stretched middle’ of the supply chain:

·        your suppliers or manufacturers may have short or up-front payment terms in advance of you receiving the goods or materials

·        your clients may not pay you for delivered end product or services for 2 to 3 months after delivery

If that is repeated on every transaction that you do, can you afford to keep funding that cycle plus other overheads for the months in the middle? Or will that leave you stretched? Or worse?

Invoice Finance may not be the most suitable product for every part of the economic cycle – but think of it another way: what other financial facility will pay you for most of the work that you have completed just a few days after you have completed it, when your customers won’t be settling anything with you for another 60 to 90 days?

We see this as the clearest demonstration of the ends justifying the cost of the means – many businesses won’t be able to manage without these facilities in the coming economic climate – and we consider Invoice Finance will likely be one of the best cash flow conservation tools available to companies.

·        It’s flexible and can adapt to most sectors and business models; it fits with business conditions and turnover, unlike the rigid structure of a business loan.

·        Your company will need continued support to ensure that waiting for invoices to be settled doesn’t limit your activities – or your ambition.

If your company has an Invoice Finance facility in place you might be wondering how we could help you. You may be able to benefit from an improved funding rate or lower costs? As you would do in your personal finances, it pays to look for alternatives that may be more suitable and/or offer you improved terms.

Several types of Invoice Finance products are available, and we can help you identify the most suitable solution for your business:

·        Invoice Discounting - The simplest form of invoice finance. You keep charge of credit control, and get paid up to 90% of your invoice’s value on the day that you issue it to your customer, with the balance when they settle.

·        Invoice Factoring – As per Invoice Discounting, plus the lender manages your credit control - this can free up your time to get on with running the business.

·        Selective - You select either the clients or the individual invoices to put into invoice finance, so you only use the facility when your cash flow requires it.

·        Specialist Sector? - Construction Finance, Recruitment Finance and Professional Services Finance are just a few examples of specialist products that could be tailor made for your sector.

Please Ask Yourself This Question:

As you approach and plan for the next 12-24 months, is it likely that you will ALWAYS have the cash flow necessary to meet wage bills, pay suppliers, or grow your activities, without the certainty of knowing that when you issue an invoice you will get funded almost immediately?

 

Gain the financial confidence to drive your business forward from here as if your client billing was all issued with same day payment terms; Invoice Finance allows you to fund both outgoings and opportunities with the business that you are already doing, and without depleting your cash flow.

Why not talk to me about how Invoice Finance can benefit your business?

Mark Grant, January 2022.

mark@fiduciagroup.co.uk

Conserving Cash Flow in 2022 Is Self Preservation For Your Business

 

As a business owner, director or manager 22 months into a global pandemic, you will by now be very well aware that thinking about cash flow conservation isn’t just in the court of your accountant, FD or accounts team; it is about self preservation and keeping the doors of your business open.

The Covid-19 pandemic just presents you with one certainty – that there are no certainties!

We do not know the impact that changing seasons and new variants will have on our business until they ‘happen’ to us – or what direct impact they will have on our customers or suppliers – which in turn of course impacts you as well.

Cash flow conservation is not a new concept – plenty of old tricks like chasing your receivables, negotiating your payables, cost cutting to trim the excess from your business costs etc.

But this pandemic and its uncertainties have put an additional urgency on ensuring you preserve a level of cash within the business where possible – for whatever is around the next corner, and one certainty is that we are all heading to another corner!

For example, you probably couldn’t just roll out last year’s budget / cash flow plans again for 2022 – did they factor in staff shortages in many sectors, the global supply chain crisis and HGV/delivery driver shortages in the UK to name just a few factors now on your radar?

So what could you consider to help you to conserve a level of cash within the business while you still have overheads, delays to banking receivables and expenses related to the business as you adjust or increase your activities to meet the challenges of the times?

For some people this may be just a case of finding out what is available to them in terms of finance products and tools – for others who might have always previously managed their business without the need of finance it might be a bitter pill to swallow, or a ‘last resort’ even.

Our very recent experience shows us that cash flow is the life blood of all of the businesses that we are dealing with, and maintaining a level to get you through this pandemic, or having a sufficient level to enable you to expand your activities and grow, is worth sacrificing a small amount of your margin to cover the cost of financing your business.

As you look at a cash flow forecast for your business this new year, factor in the tools that might be able to help you to conserve your cash flow and spread the cost of all of your outgoings over the months and years ahead; the same tools can also regulate your income to meet outgoings and opportunities as you have them.

We wanted to provide some examples of commercial finance products that can help your business to conserve cash flow and navigate out of the current situation.

Several of these are available until June 30th 2022 under the Government’s Recovery Loan Scheme (RLS) for eligible companies, alongside RLS business term loans, so please talk to us today about the benefits this could provide to your business.

 

Commercial Property Refinance

Your business may have commercial property that you own that has an outstanding mortgage on, or is unencumbered with no debt outstanding on it. In short you may have ‘equity’ in your property.

Commercial property for trading businesses will commonly be ‘owner-occupier’, the premises that they operate from; but some businesses also own and lease out commercial property that other companies operate from – ‘commercial investment’ property.

Refinancing commercial property could be used to conserve cash flow in more than one sense:

• Refinancing your existing mortgage onto a new deal could improve the rate of interest that you pay (reducing outgoings) or it could offer you fixed rate protection for an agreed period (limiting your costs for that agreed period)
• Refinancing commercial property to raise additional funds for your business is doing so over an extended period (commonly 15 – 25 year terms) and often at a significantly improved interest rate to those available on short term business loans, due to the security that the lender has in your property

We work with lenders who can also consider residential and BTL property as security for loans for business purposes. This is not suitable or viable for everyone (we and our lender partners operate a policy of responsible lending when it comes to residential properties), but if it was it could significantly improve your cash flow profile over a short term unsecured loan.

Receivables can Regulate your Cash Flow – Invoice Finance

Invoice Finance may not be the most suitable product for you in every part of the economic cycle – but think of it another way in trading out of the Covid-19 pandemic: what other financial facility will pay you for most of the work that you have completed just a few days after you have completed it, when your customers won’t be settling anything with you for another 60 to 90 days?

Without that immediate cash flow you will have to cover the cost of wages, contractors, overheads, suppliers – and then if you have the opportunity to take on more work or another project, do you have the cash flow to do that now or will it have to wait until your customers settles in the future?

We see this as the clearest demonstration of the ends justifying the cost of the means – many businesses won’t be able to manage without these facilities in the current economic climate – and we consider Invoice Finance will likely be one of the best cash flow conservation tools available to companies.

Trade Finance

Depending on the nature of their business, companies will either buy raw materials that they manufacture or assemble to create finished and saleable goods, or they will purchase ‘finished goods’ from a manufacturer or supplier – packaged and ready for delivery to their customers.

Trade Finance can be with UK based companies as well as overseas – and if it is from overseas, then Trade Finance lenders are also commonly experts in FX as well.

Your business can improve prices and terms from having the backing of a trade facility and being able to pay earlier, and Trade Finance facilities can be flexible to accommodate deposits if required on order and other costs including import VAT and shipping if these are applicable to you.

In the current environment companies need to conserve cash within the business as working capital can become strained without much notice. Funding the acquisition of goods or materials that are either pre-sold or to provide you with stock leaves crucial cash in the business to cover overheads and unexpected demands on the company.

Short Term VAT Loans

One quarter’s VAT bill was able to be deferred to March 2021 under an HMRC scheme, for bills that fell due between 20 March and 30 June 2020 at the start of the pandemic. Most firms then spread the cost of that repayment over the following 2021/22 tax year.

HM Treasury recognised that you need to conserve cash flow in your business, and not have to settle that whole quarter in one payment – but how does that help you with every other subsequent quarterly VAT bill that you face?

We have a lenders offering 12 week loans to help to settle some or all of your VAT bill – you can repay weekly or monthly as suits you best – but the big win for you here is conserving cash by spreading the payments and keeping some liquidity for whatever might come next.

Once set up for one quarter’s bill, the facility can be easily rolled when the next bill arrives – meaning that you don’t have to go through the same level of funding application each time.

Lease or HP Over Buying For Cash?

None of us are going to trade out of this environment by standing still – but when you are looking at new or replacement vehicles for your business, you should conserve cash and use smart finance.

We work with expert partners who can not only source cars and commercial vehicles, but who can source the most suitable Lease or Hire Purchase (HP) deal for your company.

Whether you are looking for New or Used vehicles, a single vehicle or entire fleet – using the right finance for your company in this environment is the smart choice. Conserving cash within your business right now makes sense – none of us know what is around the next corner or when we will need a cash buffer.

Tax efficient, AND better for the environment?? There are a range of CO2 emissions bands, and your business can benefit from an increased offset against profit the lower the CO2 output of your business vehicles. We recommend that you take the advice of your accountant to understand the full benefits available to your company.

I’m sure that you can understand therefore that we have seen a shift away from diesel cars being commonly used for business – we have seen great interest in hybrid and electric models in the last year, and yes, Tesla is very much on the scene as a business car!

Asset Refinance

Your business may have hard / soft assets, or stock, that is unencumbered or with significant equity, that you might consider putting to work to generate much needed cash flow for your business at this time.

We work with Asset Based Lenders who our clients use to access cash that they already have but that is locked up in the existing assets of the business.

 

If you are planning your budget and cash flow, why not talk to us about how commercial finance products – some that you may not even have considered – could help you to plan your way through 2022 and beyond.

Mark Grant, January 2022.

mark@fiduciagroup.co.uk