Refinancing is the process of revising the terms of an existing finance agreement. It has been around for many years, but the past year in particular has seen a huge rise in its popularity. This article will reveal why refinancing has recently increased in popularity, highlighting the role of COVID-19 and other factors.
Bournemouth-based bridging finance broker Finbri explains that refinancing can help you finish your project, obtain conventional financing, and sell assets. You can achieve all this even when you are unprepared to let go of your bridging loan or development finance, but your loan term is drawing to a close. Refinance loans are types of loans that enable you to settle past loans by accessing a fresh funding alternative. You can refinance for a wide range of reasons, such as making lower monthly payments and getting a lower interest rate. However, many people will refinance because their initial loan term will expire before extended finance or an exit via sale is attainable.
Refinancing’s Recent Rise
The sudden rise in refinancing’s popularity is largely due to the combined effects of Brexit and the coronavirus pandemic. Brexit has affected the UK in many ways, from trade to employment. Similarly, the pandemic has had a significant impact on the country’s economy and health. Furthermore, these two factors have shortened project deadlines countrywide. Thankfully, refinancing is a highly effective solution in such situations if leveraged correctly. Refinancing can help ease the pressure and enable projects to continue without hindrances.
Material supply limitations and labour shortages are largely to blame for lengthening construction time frames around the country. As a result, many projects have exceeded the expected completion times and expenses. This delay in timescales is much more than a mere inconvenience since it can become costly as well. Therefore, it is no surprise that those faced with this problem utilise bridging loans to help them get through this difficult time.
Bid developers can cope in such a harsh environment because they have access to more reliable supply chains. However, small to medium-sized enterprises are heavily disadvantaged and face bigger challenges. These companies usually lack the strong supply chains that bigger developers can rely on. As such, there is an even more pressing need for ready money, and thanks to refinancing, these small to medium-sized companies can get the cash they need in less than a week.
The issues raised above are still intensifying even though it’s a possibility that the worst of COVID-19 could be in the rear-view mirror. As such, more individuals will likely choose refinancing to get through this trying period. This reality is compelling news for lenders, businesses, and all involved, as long as it is undoubtedly the best action to take.
Final Thoughts
It is always best to consult an expert before proceeding with any major financial decision, and this applies to refinancing. Therefore, consult your bridging loan professional to ensure that you can maximise your investment. It may be advisable to proceed with refinancing you’re not yet ready to exit your development finance or bridging loan but the term’s nearing its end, but always weigh the pros and cons to ensure that it is the best course of action for you. Your professional advisor can easily help you make this assessment, so keep this in mind.
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