Picture the scenario: your client wants to pursue an exciting but time-critical opportunity. They are in a robust financial position, and they have very significant wealth and assets, but they have little income or cash reserves. They don’t want to (or can’t) sell any assets to create the capital they need, but if they can’t find a way to generate cash, they’ll lose out on the opportunity. Time is of the essence, and the money they want to borrow is significant. What can you do to help?
Breaking Down the Scenario
Many ultra- and high-net-worth individuals are asset rich, but it’s the norm for them to have low income or significant sums of money saved in the bank. This is often deliberate. Given current interest rates, it simply makes little sense to have money sitting in the bank waiting for a rainy day.
At the same time, when an opportunity comes along, that same (U)HNWI will need to access significant finance quickly. In theory, it should be easy to borrow: these individuals usually have property, assets, investments and interests that put their net worth in the tens of millions of pounds range.
Getting a loan in this scenario should be easy, but the reality is usually anything but. Lenders generally like to see solid income to let anyone borrow, and (U)HNWI, despite their numerous assets, are no exception. If your client has little income, borrowing capital can be time-consuming and complicated. Given it’s not unusual for (U)HNWI to want to access very significant capital rather than access a few thousand pounds, you’ll find that borrowing can suddenly become a real challenge.
And it’s not a simple question of just liquidating a few of your client’s assets to create the cash needed. Your client will usually hold investments that will appreciate or provide significant dividends over time. While liquidating these assets is an option to generate cash, doing so means your client cannot benefit from any future appreciation of these assets, which often makes it an unappealing scenario. In many cases, liquidating assets also takes too long: by the time the process is completed, the opportunity your client wants to capture is long gone.
Bridging Finance to Generate Cash
One of the easiest ways for (U)HNWI to unlock cash is to unlock the equity tied up in their property. Using bridging finance, they can use their property as security for a loan. They can then use this finance to invest in various types of opportunities. The real estate at the centre of the loan can be a primary residence, an investment property or a holiday home in a prime location.
Moving faster than other types of borrowing, bridging loans can see your client generate cash in as little as a week if they need to access liquidity quickly.
What Opportunities can my Client Pursue Using Bridging Finance?
Bridging finance traditionally has a reputation for only being used for property transactions (usually to buy a new house before the old house is sold), but working with a lender like Tenn, your client will be able to use the capital for more diverse and exciting scenarios.
(U)HNWI are usually savvy investors and are incredibly astute decision-makers. As a result, they will often wish to generate capital for unusual opportunities or to carry out plans that would be considered aggressive in other parts of the market. The way your client could use the cash raised through a bridging loan is, theoretically, endless.
Scenarios can include deploying capital to:
- Grow a business
- Invest in stocks
- Buy a high-value property
- Purchase luxury assets…
- …and so on
No matter how good the opportunity is, there will always be risks. Some lenders can hesitate at aggressive plans or unusual scenarios, but Tenn will keep an open mind. We understand (U)HNWI and the world they occupy – opportunities are simply different in this part of the market, and sometimes, that means the stakes are higher. As long as we see great real estate, logical ideas and a solid exit, we can consider lending, even if your client has aggressive plans.
If you have a client who would like to generate cash quickly to capture an opportunity, get in touch. We will talk you through the potential scenario and give more information about our process, what we would need from your client and how quickly your client could generate the cash they need.