Short-Term Finance for Luxury Real Estate Developer

• Client: Established luxury real estate developer with a strong track record
• Challenge: Required short-term funding to bridge the gap between exchange of sale contracts and completion across several developments
• Finance: £250,000 bridging loan over three months, with the option to extend for a further three months
• Security: Floating charge over company assets with guarantees from company principals

Property developers can often require short-term finance to manage cash flow between different stages of their projects. Enness was approached by an established luxury real estate developer looking to bridge the gap between the exchange of sale contracts and completion across several developments in Central England.

The developer had an established reputation and a strong track record, with several projects progressing at different stages. However, the timing of incoming funds meant that additional short-term capital was required to maintain liquidity while waiting for the developments to complete.

The client was looking to raise £250,000 through short-term bridging finance. The funding was intended to cover the period between exchanging sale contracts and receiving the proceeds at completion.

The case was relatively straightforward from a business perspective, but the structure still required careful consideration. The client wanted the flexibility to roll up the interest and repay it when the facility was redeemed. They also wanted the option to extend the initial term should completion take longer than anticipated.

Although the developer had strong cash flow and significant assets, the lender required additional security to provide sufficient comfort against the facility. Enness therefore considered the wider asset position of the company and how this could be incorporated into the funding structure.

A floating charge over the company’s assets was proposed, providing the lender with additional security while allowing the composition of the company’s assets to change during the loan term. Guarantees from the company principals were also incorporated into the structure.

Enness approached lenders with experience in development bridging finance and negotiated a £250,000 facility over an initial three-month term. The structure included a fixed rate payable upon repayment, a floating charge over the company’s assets and guarantees from the company principals.

The facility also included an option to extend the loan for a further three months if required. This provided additional flexibility should there be delays between exchanging contracts and completing the relevant transactions.

The transaction was arranged within a particularly short timeframe. The client initially approached Enness on a Wednesday and, by Friday, the agreement had been signed and the funds were available. This enabled the developer to maintain liquidity while awaiting completion of the underlying transactions.

The case demonstrates how bridging finance can provide short-term liquidity for experienced property developers where there is a clear source of repayment and appropriate security available. The ability to consider company assets, cash flow and guarantees can help lenders assess the wider circumstances of a business rather than relying solely on the immediate transaction.

For developers managing multiple projects simultaneously, short-term finance can provide additional flexibility between transactions, subject to the lender’s criteria and a clear, realistic exit strategy. Specialist property development finance expertise can help identify appropriate funding structures for more complex requirements.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, valuation, security, lender criteria and an appropriate exit strategy. Terms, rates, fees, loan amounts and availability may vary depending on individual circumstances.

Risk Warning:
Property or other assets used as security may be at risk if repayments are not maintained. Bridging finance is short-term borrowing and can carry higher costs than conventional finance. Borrowers should have a clear and realistic exit strategy and consider the risks associated with delays to property transactions, changes in property values, cash flow and refinancing conditions.