Commercial Review
Whilst access to funding remains the most frequently quoted obstacle to growth for SMEs in the UK, with increased uncertainty on the horizon, we at Omega don’t always recognise this assertion as we continue to deliver highly competitive finance solutions for businesses.
We have experienced another strong year within the Commercial Mortgages and Trading Businesses sector, delivering terms for start-up businesses, purchase and remortgage of commercial premises and business expansion. Increasing competition amongst funders in that space has led to reduced interest rates, with further compression expected, and importantly more debt being made available to SMEs from a range of sources to support their requirements. Recent case completing: 1.90% plus Base Rate at 80% loan to value.
As a result of changes in both tax legislation and regulation, we continue to see an increasing volume of clients expanding their investment portfolios to incorporate both Semi-Commercial and Commercial properties. We’ve been able to assist many clients with little or no property experience in this or often any sector buying their first commercial investment asset, benefiting from higher yields allowing them to borrow more against the asset but also profiting from the enhanced rental return in many cases.
Moreover, through clients’ continued search for ever greater returns on their capital, the largest increase we have seen in both case numbers and debt quantum has been within the Development, Refurbishment and Conversion market. This is usually represented by clients choosing to invest their funds into projects ranging from light refurbishment of property, splitting of units into flats and ground up development schemes. More investors see the opportunity to benefit from materially enhancing asset values directly rather than just relying on potential external market factors.
The year ahead…
Whilst I wouldn’t want to predict what political or economic changes may lie ahead (mainly as I don’t want to look very silly in a few days/weeks/months’ time!) we firmly believe there will continue to be debt options available to businesses, supporting the purchase of new premises or business expansion. New market entrants continue to provide fresh funding solutions for clients, including interest-only over longer debt term even up to 20 years, and commercial investment debt for clients with no previous relevant experience.
There appears to be no shortage of funding options available for short-term solutions to support quick purchases, required works, correcting title imperfections and so on, new bridging lenders continue to enter the market with ever increasing pressures from their respective funding lines to grow their lending book. As a result of these pressures, innovation amongst lenders results in new ‘products’ and debt options being available to clients, catering for short to medium term lending across all sectors. The traditional lines between bridging and term finance are becoming more blurred, many clients content to plan and structure debt over a 2-5 year window with interest retention and subsidisation structures being agreed.
The requirement for traditional short-term finance remains, largely as a result of the turnaround times of the traditional institutions and challengers, with growing demand as evidenced by 2018 and 2019 to date for short term finance to support refurbishment and conversion projects.
In Summary
No matter what the future holds there will always be businesses and clients looking to grow and invest respectively, and there will always be funders of some kind willing and able to meet those borrower requirements.
One thing I am willing to predict as we move towards Q2 2019; Omega will continue to provide great service, matching up borrowers with lenders on the best possible terms available from the entire commercial funding market.
