You are in: Home > News > Latest News

04/08/09

Following over a year of restricted lending there are indications that the availability of long term finance for commercial borrowers could receive a much needed boost in the not too distant future. Growing government pressure combined with the introduction of the asset protection scheme means that several mainstream lenders are now earmarking funds for commercial lending, pledging their support for businesses during the coming months.

This will be welcome news for organisations that have had their usual facilities withdrawn or reduced over the past 18 months. However, many companies are realising that although credit conditions may ease the banks will continue to apply exacting standards when deciding who to back, and will be scrutinising the credit profiles of potential borrowers more closely than ever before.

A growing number of firms are now taking steps to address any imperfections on their credit records that have resulted from the challenging conditions of recent months, ensuring that they will qualify for the maximum level of support that their bank can offer. For those with some outstanding equity and an overall track record that is generally favourable, short term funding is proving to be a popular means of accomplishing this.

Paul Hughes, Corporate Development Manager for Bridging Finance Limited explains:

"Short term finance can be very useful for companies that need to repair some minor black marks on their credit history before they can secure the most favourable offers for long term refinancing.

"By maintaining the repayments on a 6 month bridging loan an organisation can demonstrate its ability to service a debt and can build up a healthy credit history before it seeks to finalise an ongoing arrangement with a mainstream lender. We've seen enquiries for this type of 'credit repair' facility increase by almost 30% over the past quarter and we expect this trend to continue."

However, Paul is quick to stress that businesses should make sure they understand what their refinancing options will be before they approach a short term lender.

"We've seen instances where banks agree a specific refinancing package on the basis that the client proves they can successfully service a short term loan, and any company that is considering using short term funding in this way needs to be absolutely clear on what their refinancing options will be.

"Once these are established we can work with a client to structure their short term loan in a way that makes it easy for them to handle repayments, and the working capital provided by the loan can help to prevent the registration of any further adverse entries on their credit record. This is yet another example of how short term finance is helping businesses to overcome the challenges of the current market."