Chris Baguley is managing director of Bridging Finance Limited, a business that has grown over the last year from lending under £1 million to over £50 million. He is the first to admit that parts of his sector have had a pretty unsavoury reputation in the past. However, his company is enjoying considerable success by revisiting the market with a fresh banking perspective. This approach, he believes, has put the short-term finance proposition back into the business mainstream.

There are times in the life of most businesspeople when an unexpected opportunity arises. It’s one of the things that make business exciting.

It could be a chance to:

• buy a competitor’s business
• acquire a property that has tremendous future potential
• buy a large quantity of stock at an unrepeatable low price
• tender for a huge order with fantastic profit potential, if only you had the capacity and capital to fulfil it
• get a franchise or licence that becomes available that could transform the business outlook for years to come
• attend an auction where there’s potential for you to acquire a major asset at a knock-down price

To gain the advantage it’s usually necessary to act quickly; these opportunities can be fleeting. If we don’t, someone else - probably a competitor - soon will.

To strike while the iron is hot and will involve substantial spending. If the funds are to hand, fine. If not, it’s time to access cash and there are choices to be made and conditions to be met.

Slow lane

The conventional alternatives are to increase the overdraft facility or get an advance from the bank; cash-in a liquid asset; auction the family silver; seek out a secured loan; ask the building society or commercial lender to re-mortgage your home or business property. All are tried and tested routes to raise liquidity - and they all take time to arrange.

And what if the opportunity is outside your financial comfort zone? Beyond the security of your equity, say? Putting your hands on £500,000 or £5 million - in a hurry - might seem beyond your limits.

You could be in a ‘chicken and egg’ situation where, if only you had the money to acquire the asset in the first place, you’d be able to raise the finance to cover it later - using the new asset itself as all or part of the security.

Conventional lenders prefer to make advances over long timescales and they never rush into an arrangement without first:

• establishing their security over the collateral
• establishing the quality of the borrower, and
• weighing the strength of the contract.

Centrally decision-taking means there’s a queue. The conventional route takes weeks or even a couple of months.

Does that spell the end of your opportunity?

Bridging finance

Not necessarily. Raising substantial funds in very short spaces of time – without paying excessively for the privilege - can be done, with a bridging loan. A ‘bridging loan’ is a short-term, secured advance from a specialised finance house, which:

• is rarely for longer than a few weeks or months
• is usually agreed within hours
• puts the funds in place in a matter of days
• is generally for a substantial amount

Bridging finance incurs a higher rate of interest than a conventional advance because:

• it carries higher risks
• professional effort is involved in putting the security in place quickly
• interest is only generated for a short period

It’s often used to cover the ‘chicken and egg’ delay and by businesses or individuals who have something to gain from acting very quickly.

You’ll need to choose a lender that offers clients:

• fixed interest rates
• fixed time scales
• rapid response
• a highly skilled and qualified team
• immediate outline decisions
• generally completes transactions within five working days

More expensive

Bridging finance costs more than conventional borrowing. Quick completion and a short-term period, tend to make this specialised form of lending more expensive to administer and, of course, there is a higher element of risk attached. That said, there should be no arm-twisting, no brinkmanship and no interest rate negotiations with the lender.

Once you have built up a relationship with a bridging finance house, any subsequent transactions will probably be smoother and even quicker. You’ll be on your way to taking advantage of more opportunities that you thought were well beyond the reach of your financial resources.

Your next £0.5 million-to-£5 million could be a lot easier to get your hands on than you thought.