Over the past fifty years, the demand for fast finance has grown exponentially. The pace at which business is conducted has accelerated with the uptake of digital technology, and with the widespread connectivity of global coverage, businesses can strike deals internationally with just the press of a button. In the fast-paced world of modern commerce there’s continual demand for high speed funding solutions, and companies need to access financial backing quickly and reliably in order to continue trading.
One firm which offers this sort of financial assistance is Alpha Bridging, a London based lender which specialises in short term financial solutions. The funding they provide is designed to meet the needs of clients and brokers alike, and they tailor their loans to meet the short timeframes which modern business requires. As a bespoke lender, Alpha Bridging are one of the UK financial sectors up and coming businesses, and represent a valuable option for many of the country’s developing industries.
What is Short Term Finance?
Short term finance is a broad term which covers a wide range of financial products. These are usually secured loans with a relatively short repayment term. In recent years, the short term finance market has come under the watchful eye of the Financial Conduct Authority, the Government body which is tasked with regulation of the UK’s financial industry.
There are many different forms which short term finance can take, since it’s a fairly broad umbrella. Most short term loans have a repayment term of less than a year, though some exceptionally large loans may extend terms up to 24 months. Some lenders offer finance with an even shorter repayment period, and in some cases it’s possible to take out loans with specialised lenders who offer terms of 120 days or fewer. This is common in import/export finance, where the loan is provided to cover the initial costs of acquiring goods from overseas.
In recent years, micro-finance has become an ever-more popular area of short term lending. An example of micro-financing is in a typical invoice discounting scheme; a lender will “buy” invoices from a company at a discounted rate, providing them with instant capital for re-investment and day to day expenses. Once the invoice is paid by the company’s client, the company will repay the lender their initial loan (plus interest and fees), and keep the remainder of their income. This lets businesses operate smoothly from day to day, without having to wait for invoices to be paid in order to cover costs. It also means that businesses don’t need to keep large amounts of capital on hand to keep things running; they can re-invest money immediately wherever it’s needed.
Why do Businesses need Short Term Finance?
Traditionally, the size of a loan influences the time it takes to be approved, and the length of time over which it’s repaid. A standard residential mortgage, for example, takes months to arrange and can have a repayment term of many years. Up until the 1960s, this was a fact of life for businesses: if they wanted to take on additional credit in order to expand, they would need to arrange a sizeable loan to cover it. A loan large enough to build their business would take a while to arrange, since the sums involved were so large, and there was so much bureaucracy involved. Acquisitions and purchases could not proceed faster than the finance that backed them, so businesses were restricted by the speed at which banks worked.
In the 1960s, though, lenders finally became able to approve large loans for a short period of time. This was due in part to the growing deregulation of the financial system, which had traditionally been tied up with red tape. The short term loan industry grew from humble beginnings to a major financial sector by the turn of the millennium, as it provides a very powerful tool for businesses to expand.
One very common field in which short term finance is often used is real estate development. Many developers will want to secure a property or a plot of land before beginning work, but will be unable to secure a long term financial solution to cover this initial expenditure. Many businesses, especially those experiencing fast growth, will be unable to finance this expenditure through capital, and instead will need to borrow heavily in order to begin work on a project. This is where short term finance comes in; the developer will take out a loan to cover the initial costs of their project, starting the ball rolling with the money they borrow. Once the project reaches an appropriate stage they’ll arrange for a long term financial solution to cover the ongoing costs of development, and to repay the initial short term loan.
The usage of bridging loans isn’t restricted to property developers, however; many bridging loans are available for private clients, and can be used for a variety of purposes. For example, a retiring couple might decide to move from their current property into a small bungalow – they’ve managed to find the ideal new home already, but haven’t yet found a buyer for their current property. This presents a problem for them; they’re caught in a property chain, and are reliant on finding a buyer soon in order to complete their own purchase.
This can mean that they’d have to accept a lower offer on their own house than they would like, simply because they need to sell as soon as possible to avoid losing their new home. In this situation, a bridging loan can be the ideal solution; by taking out a loan to cover the cost of their new property, the couple are able to secure their new home and begin moving in. They can then sell their old house in their own time, and once it’s completed, they can repay the bridging loan. Because they haven’t had to accept the first offer that came along they can hold out for a better price, and don’t have to worry about losing their perfect retirement home.
This use of a short term loan to create a “bridge” while long term finance is arranged has become one of the most popular ways for short term finance to be employed. It’s a flexible tool which businesses can use to take advantage of opportunities quickly, exploiting them as they become available instead of being constrained by the regulations of high street lenders.
Who are Alpha Bridging?
Alpha Bridging are a short term financier in the UK, who offer bridging loans for businesses and property developers. Though they’re a relatively new face on the London financial scene, they draw on a wealth of experience built up by their top sales team. Having seen their business increase fourfold during 2015, Alpha Bridging have amassed a significant catalogue of clients and an enviable lending portfolio. Their business focusses on playing to their strengths as a small, nimble lender; Alpha Bridging prides themselves on offering a decision quickly, and providing a personal service to their clients. Their Managing Director, Mercedez Binning, highlighted their commitment to developing relationships with clients in a 2016 press release:
"Alpha Bridging works because we remain true to the principles of personal service. We offer an immediate yes or no in principle and if it is a yes, we work tirelessly to ensure the deal gets done. I and my fellow directors visit many clients personally and our hands-on approach and ability to get the job done provides brokers and clients with the certainty that if you come to Alpha Bridging, you and your clients are in the right hands."
Committing to a bespoke solution is a necessity in the world of short term finance, as so few clients will have the same requirements. It’s impossible to adopt a one size fits all approach, because one customer’s needs will likely be drastically different from the next. Instead, it’s vital for bridging firms to create a team which can respond quickly and effectively to different needs, and tailor their working practises to meet them.
What Products do Alpha Bridging Offer?
Alpha Bridging are, as bridging lenders go, fairly small. However, they’re one of the most mobile and adaptive lenders in the industry, and in 2014 they offered £3 million worth of bonds which touted a 10% annual return rate – far above what most retail bonds offer. In the current climate of low interest rates, this high rate of return was snapped up by investors nearly instantaneously. Alpha Bridging were then able to leverage this investment into greater loan capital, to continue their growth. This high investment has allowed Alpha Bridging to go from strength to strength, and during the course of 2015 they saw the size of their holdings increase 400%.
Leveraging their existing assets, Alpha Bridging offers a set of short term financial solutions of up to a quarter of a million pounds. In the world of bridging finance, this places them somewhere at the top of the small lender pool; they’re catering to more than just small-time businesses and investors, but don’t yet cater to multi-million pound development loans. This means that Alpha Bridging are able to provide a well-balanced service to all of their customers; ones which might find themselves treated as “small fry” by larger lenders still receive the trademark Alpha Bridging customer service and care, while those which have outgrown the small bespoke lenders will appreciate still receiving the customised structure and flexibility of Alpha Bridging.
Regulations in the Short Term Finance Industry
The powerful ability of short term finance to help a business expand makes it a desirable tool for up and coming businesses. Like any investment, however, a business which takes out a short term loan poses a risk to the lender. There’s always the possibility that the borrower might fail to repay, in which case the lender is left holding a lot of debt; that’s why bridging financiers are so choosy about who they approve for their loans, and why they insist on a valid, secure exit strategy.
During the late 1990s and early 2000s, bridging finance was widely used to secure properties for development. The real estate market was so buoyant that there was little to no chance of the loan going unpaid; even a business which had little experience, capital or backing would be able to repay their loans if house prices continued to rise, which they did. Of course, once house prices inevitably stopped increasing, many borrowers defaulted on their loans, and this created a shockwave throughout the financial industry. Many of the loans were made to businesses which had no means of repaying if their investment failed to pay off, which meant that lenders were essentially betting against the future.
The involvement of bridging loans in the financial problems of the early 21st century has altered public perception of the industry; it’s all too easy for people to associate “bridging finance” with a less than reputable field of lending. This is far from the case, however; the issue lies not with the loan, but with the lender. As long as short term finance is only provided in reasonable, secure circumstances, it’s just as safe as any other type of finance. Of course, public perception plays a great part in the sustainability of the financial industry, as lack of consumer confidence can have a severely detrimental effect on traders.
To help improve consumer confidence, there are numerous regulatory bodies and industry organisations that seek to ensure short term finance is used properly and responsibly. The Financial Conduct Authority, as mentioned above, deals with Government oversight of the industry, but there are also numerous trade organisations which self-regulate the short term finance sector. Foremost amongst them is the Association of Short Term Lenders (ASTL), a trade body which was established to improve and maintain consumer confidence in the short term finance industry. Their membership contains hundreds of financial firms both large and small, and they work hard to build a cohesive lending community. Alpha Bridging joined the ASTL in 2016, with the organisations chairman Benson Hersch saying at the time:
“We welcome any lender that is open to helping to progress and promote the positive reputation of the bridging industry both through what they say and how they behave. The bridging industry is a growing one and it is essential that it grows in the right way with lenders that are ethical, open and transparent with both brokers and borrowers.”
The ASTL, as an organisation, does not simply provide an umbrella under which bridging companies can operate. They are a fully-fledged industry body, and they work to tie the UK’s many different short term lenders together by instilling a sense of community. To this end, they hold an annual conference at which their members are addressed by many professionals from related fields and industries. For example, at their 2016 conference the attendees were addressed by representatives from the FCA, from Savills Estate Agents and the Times newspaper. These valuable outside perspectives give members a useful insight into where the industry stands today, and where it’s likely to stand tomorrow.
Alpha Bridging and the Future of Finance
During its short history, Alpha Bridging has proven that it has the expertise and knowledge to deliver high-quality financial solutions for many different clients. With its staggering rate of growth, Alpha Bridging look set to improve and increase on their successful track record in the future, and their involvement in this growing sector of the industry looks set to see them become ever more important.
At the start of 2016, Alpha Bridging announced that they would be launching a peer-to-peer component to their lending. By rebranding as “Kuflink”, Alpha Bridging would also seek to define themselves within the industry as a forward-looking, innovative lender. The key selling point of their new peer to peer platform is that each and every loan will be fully vetted before being passed on to peer investors, and Kuflink will also fund the first 20% of each loan. By putting their money where their mouth is, Alpha Bridging are able to give investors the security they need to invest in confidence. This is also a cunning way for Alpha Bridging to extend the size of loan it can offer without having to secure a great deal of finance from outside investors. Kuflink can continue to offer loans of £250,000, but as they can also secure four times as much funding from P2P sources they can offer borrowers loans of up to £1.25 million. This is a great way for Alpha Bridging to take the difficult step from a big fish in a little pond to a major player in the ocean of bridging finance.
Constant innovation and invention is the name of the game for Alpha Bridging, and they’ve proven that they have what it takes to make a dent in the short term finance world already. With their continuing commitment to customer service and bespoke tailored loans, Alpha Bridging (as Kuflink) look set to continue making waves in the world of bridging.
Official resources about Kuflink P2P can be be found here:
Official resources about UK financial regulation:
- National Association of Commercial Finance Brokers (NACFB)
- Association of Bridging Professionals (AOBP)
- The Association Of Short Term Lenders (THEASTL)
- The Financial Conduct Authority (FCA)
- 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.
- 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
- Watts Commercial
Bridging loan guide by Bridging Directory