The untapped potential of second charge lending

As awareness of second charge lending increases, lenders working in the bridging space are seeing demand grow, too, and this is set to continue as the UK weathers the storm of the cost-ofliving crisis, with interest rates, inflation, and energy bills all rising.

The effects are yet to be fully felt, and it will take some time to see how things pan out, but coming out of the pandemic, we’ve been working with many businesses looking to raise funds by way of second charge loans – some to keep their businesses afloat and others to jump on new opportunities, with most enquiries coming from company directors and the self-employed.

We’re on a mission to raise awareness of the potential of second charge loans. We believe that many brokers and introducers don’t actually realise that when we say we can lend for any business purpose, we mean any business purpose.

When you look at the housing market, landlords – whose credit profiles may have been affected by COVID-related events – may have an appetite for HMO conversions but are hitting barriers when it comes to borrowing. A second charge loan is a good option for them.

Coming out of the pandemic, businesses may have struggled to pay tax bills – or even their employees’ wages – and may need to take out a loan against their main premises or other properties that they own in order to cover the temporary shortfall. A second charge loan is ideal for this.

And it’s not all been doom and gloom. The pandemic has created countless opportunities for many businesses, and they now have growth and expansion plans. New premises, a new fleet of vans, working capital, hiring new staff, upgraded IT kit, an advertising campaign – the list of possibilities and opportunities is endless.

SoMo is able to offer a quick and simple loan based on the LTV of the property. We have a market-leading LTV of 70 per cent against the OMV and rates from 0.6 per cent pcm for all applicant types, whether it be an individual with adverse credit or a business with a short trading history.

We’ve seen a 25 per cent increase in our second charge lending over the past year, and these loans now make up almost 50 per cent of all our cases.

This isn’t only because of our marketleading interest rates. Brokers, intermediaries, and clients are turning to SoMo because we have the experience, the knowledge, and all the systems in place to provide speedy, nohassle loans in this niche market.

SECOND CHARGE LENDING BUCKED THE TREND DURING PANDEMIC

Recent data from the Finance & Leasing Association reported that second charge lending has recently returned to pre-pandemic levels – but here at SoMo, we’ve found this loan type remained consistent throughout. It comes as no surprise to us that we’re seeing significant growth in second charge lending because it’s an ideal solution for businesses that already have a mortgage secured against a property and need a simple, no-fuss, short-term loan.

Despite the financial turmoil in the UK at present, we feel positive about the future. As a business overall, we’re lending more month-on-month and year-on-year, and we see second charge loans as an important part of our growth strategy.

We’ll be opening a new office in London this year and want to work closely with London-based business development managers and underwriters to capitalise on the second charge market.

The message starting to come back from our network is that they’re surprised by the demand and delighted that this type of loan can be used for such a wide a variety of purposes – but more needs to be done to spread the good word. 