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. They could consider a formal IVA, but was advised by an insolvency accountant to explore asset-based finance first to protect their position and avoid a formal insolvency event.

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.