Secured Business Loans Rebounding Post-Brexit

Michelle Tuvey Michelle Tuvey | Loan Underwriter

Few people were surprised to see business lending and borrowing drop-off over the summer in light of the uncertainty surrounding Brexit. Now it looks like some of that uncertainty is wearing off. The numbers show increasing confidence in the economy at many levels, including business lending. Secured business loans are rebounding if numbers from Q3 are accurate.

According to the Digital Journal, more than £140 million was loaned to businesses by way of bridging loans during Q3 2016. That number represents a 6.6% increase year-on-year and a 12% increase compared to Q1. More importantly, it is a 54% increase over Q2. The numbers clearly show that businesses are looking to borrow again. Their willingness to take on debt could be a sign of even better things to come.

For the record, bridging loans are a form of secured business loans meant primarily for short-term borrowing. The name actually comes from the fact that businesses use the loans to bridge gaps in revenue streams. For example, a property investor may be looking to buy a new property even while other properties in his or her portfolio are for sale. He/she may look to a bridging loan to complete the transaction with the expectation that he/she will be able to pay off that loan when the other properties sell.

Bridging Loans Are Secured Against Property

Bridging loans are considered secured business loans because they are taken out against some sort of collateral, usually property. In that sense, they are very similar to the secured loan products offered to retail customers. Borrowers put up cleared property or equity as collateral with the knowledge that defaulting could wind up costing them that property. Banks are happy to make the loans because they have significant collateral to fall back on.

The Digital Journal report sheds a little bit more light on secured business loans by explaining that more commercial borrowers, particularly developers, are increasingly turning to bridging financing out of frustration with traditional borrowing. Bridging loans are easier to get, approved more quickly, and often a more intelligent way to borrow to finance short-term needs. Again, this suggests a greater level of confidence in the economy.

Consumers Borrowing More as Well

The fact that commercial interests are taking advantage of secured business loans more frequently is good news in and of itself. But there's more good news according to Digital Journal. Apparently, retail customers are more willing to borrow via secured loans as we get further away from Brexit. And yes, they're also looking at bridging loans more often too.

Bridging loans work the same way for retail customers as commercial borrowers. And, in fact, the number one reason for applying for bridge financing is to purchase a new home.

If you've ever attempted to climb the property ladder, you know how it goes. You put your home on the market while you look for a replacement. The idea is to line up both the sale and purchase transactions so that they occur at roughly the same time. But when that's not possible, you might risk not being able to buy your dream home because you cannot sell your current home in time. That's where a bridging loan would come into play.

At any rate, secured business loans are rebounding nicely as we get further away from the June referendum. That suggests greater economic confidence in both the commercial and residential sectors. Now we sit and wait to see what actually happens once the government invokes article 50 to begin Brexit negotiations. Hopefully, there will be no further setbacks to the economy.

Sources:

Digital Journal -- http://www.digitaljournal.com/pr/3127841

Instantly compare 950+ of the UK's best secured loans

Rates from as low as 3.75%