In a tough lending environment, prospective borrowers are increasingly being asked for security to support funding applications for fit-out projects, particularly in sectors which might be susceptible to future lockdowns, such as hotels, restaurants and leisure businesses.

In lending parlance ‘secured’ typically refers to charges over bricks and mortar premises, not, as some assume, to guarantors.

In response to this, Fit Out Finance has connections with several reputable secured loan providers who are able to offer facilities supported by first, second or third charges against freehold or long -leasehold premises, whether those premises are commercial or residential.

With the additional security of charges over property, lenders will be more relaxed over other transaction terms and able to offer much more flexibility against conventional equipment leasing facilities. With security we can offer facilities over periods up to 10 years rather than the usual 5 year maximum. In a recent case our client benefitted from a 6-month payment holiday at the start of the agreement, which means that they are able to get the fit-out completed and the restaurant fully open and earning money before they start to make monthly payments.

Additionally, we can be far more relaxed around deposits, pre-payments and staged payments than on a conventional leasing transaction. These are things that can improve your relationship and terms with your chosen fit out contractor or selected trades.

The underlying transaction can be documented as a loan or a lease arrangement to suit your tax and accounting requirements and won’t be restricted by the nature of equipment or the number of suppliers, which sometimes affect such transactions.

Properties acceptable as security include the main residence, rental properties (either individual or portfolios) or commercial properties. In some cases, we are also able to consider non bricks and mortar assets as security, including classic vehicles, boats or share portfolios. The key criterion is that it can be professionally valued, and it is possible to put a charge on it.

On a cautionary note, you need to give serious thought to putting residential property up as security, particularly when that property is the family home. For our part, Fit Out Finance also takes this very seriously. So much so that we will stipulate that you must take professional advice from a recognised legal practitioner before committing to a transaction. Additionally, we will never rush or push you into signing. We respect the need for careful consideration before entering into a secured finance transaction

For businesses that own their own premises – for example hotels – it makes a lot of sense for the charge to be over those commercial premises. Alternatively, charges can be split over multiple investment properties in a portfolio, thus leaving the all-important family home out of the equation.

Whilst the majority of our business is likely to remain as conventional unsecured lease, loan or hire purchase, the availability of good, professional secured loan facilities means that fit out finance can be available in circumstances where traditional agreements simply won’t work.

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