Bridging the Gap for a Landlord in Financial Distress

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Unfortunately, business problems can spiral and eventually hit an auxiliary property portfolio, or investment strategy. Say a company owner, with existing BTL properties, finds themselves in a difficult financial situation. Here is how a bridging loan could help:

Client profile:

Client: UK resident/national
Age: 52
Profession: Former recruitment company owner
Assets: Two buy-to-let properties in Manchester
Debt Issues: Business went into liquidation, personal income dried up, mortgage arrears building on one buy-to-let property
Referral Source: Insolvency accountant advising on portfolio strategy

The problem:

The client’s company collapsed as a result of the pandemic and a costly legal dispute. Their personal income was at a standstill. Their rental income would have kept them afloat for a while, but with one tenant defaulting on their rent, they quickly fall into three months’ worth of arrears on their mortgage of a buy-to-let property in Salford.

Facing the threat of repossession from their high-street lender, the client would understand that securing finance through traditional routes would be unlikely due to recent credit issues. Seeking guidance from an insolvency accountant, they were advised to explore asset-based finance to protect their position and avoid a potential formal insolvency event down the line.

The solution:

It’s this accountant who could put them onto our radar. Referring them to Market Financial Solutions, we could structure a 12-month fixed bridging loan that provided the short-term liquidity they needed, while accommodating their complex credit profile.

Example terms of the loan:

Loan amount: £292,500 (65% LTV based on £450,000 value)
Product type: 12-month fixed bridging loan
Rate: 0.90% per month fixed
Interest: Rolled up (no monthly payments required)
Exit plan: Refinance with a specialist BTL lender once income stabilises

The outcome:

This bridging loan would allow the borrower:

Clear their mortgage arrears
Halt the repossession process
Retain ownership of the property and its long-term capital appreciation potential
Put in place a new tenant and reinstate consistent rental income

Twelve months later, with a stable tenancy and improved credit profile, the client could refinance the loan with a specialist BTL lender and return to financial stability.

Working on a similar case?

If a landlord is under financial pressure and time-sensitive decisions are needed, an early sense-check can help clarify available options.

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FAQs

https://www.mfsuk.com/case-study/landlord-in-financial-distress/

What is insolvency?

Insolvency is a state in which a person or company is unable to pay its debts on time, and has no feasible way of paying them in the future. If this issue is not addressed, creditors can pursue legal action, which may lead to CCJs and other issues.

What is repossession?

Repossession is the process lenders go through to take back a property where the borrower has defaulted on their repayments. It allows the lender to then sell the asset in an attempt to recover their money. In the UK, a lender can only repossess a home if they have court permission.

What can landlords do when a tenant defaults?

Currently, landlords can serve a Section 8 notice to regain possession of their properties when tenants fall into rent arrears, or otherwise breach the terms of their tenancy. It should be noted that as the Renters’ Rights Act comes into play from May 2026, section 21 evictions will be abolished. It will no longer be possible to evict a tenant without a reason.