Specialist finance is essentially a form of non-bank finance, often used to complete property details very quickly and avoid the headache of traditional mortgages. Whilst specialist finance has been around for sometime, it has certainly grown in prominence following the 2008 credit crisis which has notoriously seen banks become even stricter with their lending criteria, making way for more personable, specialist private lenders to offer funding for purposes such as property development, business funding and auction purchases.

Fast funding and avoid property chains

The types of specialist finance include bridging finance, development finance and mezzanine finance, amongst others. One of the main benefits is the ability to purchase a property within a tight deadline, perhaps to beat off other potential buyers or to complete an auction purchase. Whilst a mortgage from your local bank could take several months to process, there are specialist lenders such as MT Finance who can offer funding within 2 to 4 weeks – depending on the project.

As Lending Expert explains, with specialist finance such as bridging, there is an opportunity to avoid traditional property chains and being gazumped or beaten last minute by another buyer, with the ability to get fast funds and complete on your deal as soon as possible.

Funded in stages

For those building property developments, a specialist lender can offer you development finance, giving you a very bespoke funding option – including a loan that covers 100% of build costs and 50% of the land purchase price. A further benefit is that you receive your funding in stages or tranches, making it well-adapted to every stage of your development process and you only pay interest on what you use.

Bad credit considered

In addition, specialist finance is more willing to consider those with bad credit and adverse credit histories. The funding is always secured against a valuable property or asset and this is used as leverage to borrow the money that you need. This also means that you can be eligible if you are a sole trader or self-employed, making no difference to the eligibility criteria.

Bank loans and mortgages are very strict with whom they lend to, but all credit histories are openly considered for products such as bridging loans and mezzanine finance. With the latter, you may be required to give up a small percentage in the property you are buying.

Lenders will also look at the employee background of an applicant and whether they have completed any property developments or purchases in the past and the success of these. Plus, if you have very detailed costings and plans for your project, this will demonstrate that you are a serious candidate.

Do your homework

Whilst specialist finance certainly has its benefits, it is important to do your homework and fully understand the terms and conditions of your specialist finance.

Bridging finance can be very effective to complete on a short deadline, explains Octagon Capital. Your typical loan will last for 3 to 24 months, but if you cannot keep up with repayments or your project is delayed, you may have to refinance under some less favourable terms or worse case scenario, your property could be repossessed.

There are also some additional costs to consider when applying such as solicitor fees, survey fees, broker fees and early repayment charges if you wish to leave the contract early.

Specialist finance lenders are willing to consider every type of customer, but just make sure that you have done your homework and have fully costed out your project and your exit strategy – and this will make sure it is a successful endeavour.