The UK’s economy benefits enormously from the strength of its financial institutions. Over the past five hundred years, Great Britain has established itself as one of the world’s foremost financial powerhouses, providing a trading platform for businesses all over the world. With billions of pounds flowing through the London Stock Exchange, and thousands of deals being struck daily, the UK is one of the world’s top centres of finance, and as such the national economy relies on the financial industry’s continued profitability.
At the centre of the UK financial sector is the high-speed high-value lending industry, the area of finance which places emphasis on speed and flexibility. The short term finance industry is one which enables businesses up and down the country to grow and expand, taking advantage of opportunities as they’re presented and exploiting them to their fullest. The flexibility of short term finance and the multitude of ways in which it can be applied makes it an excellent solution for many different problems, and it’s widely used throughout the UK. Watts Commercial are one of the country’s leading financiers, and provide bespoke funding for clients of any size.
Who are Watts Commercial?
Short term finance is an industry undergoing explosive growth, and as such many lenders have only a few years of trading history to their name. Watts Commercial, however, has more than 30 years under their belt as a successful lender, and can rightfully claim to be one of the industry’s leading lights. As one of the more established lenders in this sector, you might expect that Watts Commercial employs long chains of communication and multiple levels of management. This isn’t the case, though; one of the most important qualities which a short term lender can have is their ability to communicate effectively with clients, which is why Watts Commercial keeps an open line to their directors. This means that borrowers can talk directly to the person who calls the shots and get an authoritative answer almost immediately; there’s no waiting around while they call a decision-maker.
The ability to adapt is key in an industry which is always changing, and short term financiers cannot tie themselves to a few “core” products. They need to respond to the requirements of the market, and to meet the demands of the clients. That’s why, as a modern lending firm, Watts Commercial have diversified the products they offer so that customers of any size can make a deal which suits them.
What is Short Term Finance?
The name “short term finance” is both vague and accurate; every product which Watts Commercial offers is a form of finance, offered on a relatively short term, but the types of loan which can be arranged vary so widely that placing them all under the umbrella of short term finance doesn’t do a lot to describe the industry. Let’s have a quick look at where short term finance started, and what it’s become today.
Up until the mid-20th century, financial institutions were tightly bound by practical regulations. There were very strict rules in place which governed what was and what was not acceptable, and a high value loan with a short repayment term was seen to be overly risky. This meant that a business looking to secure finance would need to apply well in advance, because securing a loan always took a long time to arrange. In addition to this, the loan would only be approved if certain criteria were met; if the strict regulations for a mortgage, for example, weren’t met, then there was no way that a loan would be approved. What this meant is that businesses were forced to rely on their own capital to secure opportunities for expansion, which presented a dilemma; if they re-invested all their capital into their business, they wouldn’t have the necessary funds to exploit opportunities. However, if they held capital in reserve “just in case”, they couldn’t re-invest it in the business, essentially forgoing the opportunity to improve the business now in case there was an opportunity to benefit later.
Clearly, the industry was crying out for a way to bridge the gap, and in the 1960s, enough red tape was removed to allow lenders to offer loans at short notice, and with a quick repayment period. These were typically secured against some form of collateral, such as a property or real estate, and allowed businesses to bridge the gap between the beginning of a project and the point at which they could secure long-term financial backing. Loans which are used to “bridge the gap” while long term finance is arranged are known as “bridging loans”.
A common use for this is in the field of property development: a developer can obtain a property which is unmortgageable due to disrepair, or a short lease, or for any number of reasons. They can then secure a short term loan to cover the costs of purchase and of bringing it into a mortgageable condition, at which point a mortgage would be secured and used to repay the initial loan. Alternatively, they could sell the property once it’s brought up to scratch. In either case, the developer has used their access to short term finance to turn an unsellable property into a profitable asset.
What do Watts Commercial Offer?
As mentioned previously, Watts Commercial offer a diverse range of products, from small loans for sole ownership businesses to substantial backing for major development projects. The sheer flexibility of financial backing they offer means that they can offer expert advice and bespoke services for clients of any size.
What makes Watts Commercial stand out from the crowd is their access to the very best lenders – they can secure expert professional funding from the best sources, so they can supply borrowers with the best rates available. In addition to this, they require that their lenders compete for the opportunity to invest in each loan, so that every project is judged on its own merits; one which promises a great opportunity for investment is likely to secure an even better rate. The various products which Watts Commercial offers can be split into the following categories:
Financial backing for commercial enterprises can be hard to come by, due to strict regulations, but Watts Commercial offers extensive opportunities for businesses to obtain finance for a variety of projects. This can be used to finance care homes, professional practices, warehouses, offices, and anything else.
- Interest-only and repayment plans are available, to suit different business goals.
- Arrangement fees are added to the loan, and separate VAT loans are available as well. This removes the need to pay capital upfront when making a purchase; the entire purchase price can be shifted to the end of the loan.
- Projects can be supplied with up to 80% of their value, or can be financed entirely if an alternative source of security is provided.
- Commercial properties can be re-financed, providing a source of capital for a business in need of additional cash flow.
Bridging loans are often some of the fastest-moving financial products around, and Watts Commercial pride themselves on the lightning speed at which they can move. In fact, in exceptional circumstances they can even turn a loan around in 48 hours – when there’s no other alternative, Watts can give a business what it needs to succeed at very short notice.
- Average approval time between 7 and 10 days. Although not as superfast as their 48 hour top speed, 7 days is still far beyond the industry average of 29 days. Taking an application from first meeting to the transfer of funds within a week is still blindingly quick, even in the ever-accelerating world of modern finance
- Interest can be rolled-up into a single final payment, so that the business won’t need to service the loan until they repay it.
- 100% funding can be achieved, if additional security is provided.
- Fees can be included within the loan itself, meaning that there are no upfront costs that can’t be deferred to a later date.
Getting a property development project started can require a large injection of cash, which is often hard to come by. Watts Commercial offer a stable and reliable source of funding for projects of any size, and can tailor their products to the requirements of their clients. Watts Commercial provide funding for the development of many different types of property, including apartments, housing complexes and holiday accommodation, and also offer finance for refurbishment and conversion. The features of their property development loans include:
- Mezzanine financing, a flexible way to “top up” the project’s funding if additional finance is required. This can allow developers to finance up to 90% of the project through specialised borrowing, providing options for developers to expand quickly.
- New home warranty, which covers the build for 10 years against structural faults. This is supplied by the Council of Mortgage Lenders.
- As with Watts Commercial’s other financial products, borrowers can defer arrangement fees and interest payments to the end of the loan, removing the need for initial capital.
Unsecured Business Loans
The most flexible product of all is the straight-up bread and butter business loan; this provides businesses with a cash injection which can be used for a variety of purposes. Whether they’re looking to expand, to pay a one-off expense or to manage their cash flow more efficiently, nearly any business can make use of a Watts Commercial business loan.
- Decisions are reached within 48 hours, and funds are often transferred within 7-10 days.
- No early redemption charges, which permits greater flexibility than loans from many other retailers.
The world of finance has become even more complex in the past decade than it ever has been. The sheer number of options which businesses have access to is enough to boggle all but the most experienced financier, which is why Watts combine their acquisition finance products with their extensive industry knowledge to provide solutions which are appropriate for their clients.
Every business is different, and Watts Commercial have access to many different financial packages which can provide the ideal solution for any problem. From Government incentives to private equity and unsecured loans, Watts Commercial can create a combination which ticks all the boxes.
It could be to win a new contract, to upgrade existing assets or to streamline current operating procedures; businesses regularly need to invest in new equipment, but outright purchase can be hard to finance. Watts Commercial offers many different solutions for businesses to obtain new assets, with flexible terms:
- Hire purchase
where the ownership eventually passes to the borrower
- Finance lease
where the lender leases the asset to the borrower
- Operating lease
which allows the borrower usage of the asset without exposing them to the risks of ownership
Businesses are often kept waiting while their clients pay off invoices, but an invoice financing scheme allows them to keep a reliable cash flow in place. Invoice financing is an innovative way for businesses to improve their flexibility, and allows them to re-invest capital much more quickly than if they relied on customer payments alone.
- Construction finance
is tailored for businesses which rely on receiving payments for ongoing development. Construction often requires a steady stream of capital to maintain momentum, so a reliable source of finance can often prove invaluable
- Invoice discounting directly
funds a business’s bankroll whenever they issue an invoice, and up to 90% of the invoice value can be provided upfront
- Factoring allows
businesses to outsource the collection of invoices to a specialist agency, and receive up to 85% of the invoice value upfront
Responsibility in the Short Term Finance World
Many short term loans are secured against property, or against assets of some sort. This means that should the loan go unpaid, the lender will be able to reclaim their capital and expenses through the sale of the borrowers assets, just as in a mortgage. Because of this potential risk, borrowers have to be extremely careful when taking out a short term loan; the possibility of defaulting is usually low, but the consequences can be severe if it should occur.
Bridging loans became very popular towards the end of the 1990s as an efficient way of securing and selling property. At the time, real estate prices were unstoppably buoyant and seemed to be going up and up for ever; however, the bubble inevitably burst in the mid-2000s, leaving many developers in possession of properties worth less than they paid for them. This meant that they couldn’t repay their creditors, who in turn couldn’t recoup their investment.
What it boils down to, in essence, is that lenders were making loans which they really shouldn’t have. The only reason they had to believe that they would be repaid is that property prices were rising; if their borrower could sell the property at a profit, then everyone’s a winner. However, as proved to be the case, once the real estate market slowed down it became impossible to collect on their loans. Bridging finance gained an unfairly poor reputation because of its association with this episode; the product itself was never at fault – only the lenders themselves, who approved loans unjustifiably, were to blame.
To help rebuild consumer confidence in the financial industry, numerous trade organisations and Governmental oversight committees have been established. The Financial Conduct Authority is the main regulatory body which deals with financial affairs, and is tasked with regulating the world of short term lending. Although many traders still offer products which are “unregulated”, the FCA has made clear that they’re extremely impressed with the quality of loans on offer throughout the bridging finance industry:
“The quality we have seen [regarding short term finance] has been really good and not what we expected. The data shows that the typical borrower is older and that the loan-to-values are conservative compared to the mainstream market. It is clear that the regulated part of the market can play an important and responsible part in the mortgage market”
Lynda Blackwell of the FCA, speaking at the Association of Short Term Lenders Conference 2016
The Association of Short Term Lenders is an industry body formed in 2008 with the aim of promoting and maintaining the resilience of the short term lending industry through responsible, honest business practises. Membership of the ASTL allows businesses to benefit from direct information, and also demonstrates that they’re voluntarily committed to a high standard of practise. Because members can be held to account by a disciplinary board, the ASTL improves the public perception of the short term lending community, giving them greater trust in their ability to self-regulate.
Watts Commercial in the Short Term Finance World
The short term finance industry is one which is constantly evolving, and which rewards adaptability. Watts Commercial is one of the rare firms which combine an established code of conduct and experience with a forward-looking attitude, which enables them to capitalise on their expertise while meeting the needs of modern commerce. As a lender in the modern marketplace, Watts Commercial look set to continue building an impressive track record in years to come.
Official resources about Watts Commercial:
Official resources about UK financial regulation:
- Bank of England Website
- Prudential Regulation Authority
- Financial Conduct Authority
- The Financial Policy Committee
- Financial Services Compensation Scheme
Other Unofficial Bridging Finance Guides
Covering areas of UK financial regulation and aspects of Bridging Finance.
- Alpha Bridging
- Association of Bridging Professionals
- Central Bridging
- Commercial Banking
- National Association of Commercial Finance Brokers
- Reward Finanace Group
- Short Term Finance
- Taxi Finance
- The Association of Short Term Lenders
- The ASTL
Bridging loan guide by Bridging Directory