Traditional Lenders vs Alternative Specialist Challenger Capital Providers...

Whether you are an established trading business (manufacturer, hospitality business, etc), property investor or house builder, why would you, or why are businesses turning to non-bank lenders for financing - and in many cases paying a premium on the cost of borrowing - even with high-quality assets and or have a solid established profitable businesses?

There are many reasons why creditworthy borrowers with strong track records and desirable assets turn to non-bank lenders, for which we explore a few reasons below. This also applies to other not so creditworthy companies or investors across entire business sector spectrum.

Within the Real Estate sector, although not exclusive to real estate, these broad trends driving borrowers toward non-bank lenders, creating high-yield credits that are senior in the capital structure and backed by strong assets and stable cash flows in the UK and around the world are:

We aim to deliver much needed capital for SME’s and Property Developers.

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1. Regulation and Regulatory Constraints

Rigorous and stringent underwriting criteria with banks demanding specific loan-to-value ratios, occupancy rates and average lease lengths etc are some real estate specific examples even when circumstances mean there are significant compensating de-risk factors.

2. Timing & Simplicity

Red tape and strict criteria that often doesn’t reflect the nature of SME business models means that the UK’s smallest businesses are often turned away empty handed when they approach mainstream lenders such as banks.

Fewer questions, less paperwork and instant approval or decline decision with in some cases adverse credit not even negative factor nor none home owner status as is often the case with high street main banks is one big positive factor for alternative lending capital providers. An example of this being "Merchant Cash Advance" or "Bridging Loans".

3. Business and or Investors' Need For Flexibility

In the case of Merchant Cash Advance as an example

This is cash flow finance or funding solution perfectly suited to businesses that have a high volume of customer card payment transactions, such as those firms operating in the retail and hospitality sector.

Rather than having restrictive monthly payment obligations, you’ll pay a percentage of what you earn - improving cash flow - and loan can be paid off faster, or with time, and in either case not putting pressure on limited cash-flow.

With Bridging Loans and or Development Finance, these often have options such as,

Differed interest, allowing for lower monthly payments therefore more monthly cash flow
Rolled up interest therefore no monthly payments during loan term
Interest only options
Conversion to longer term finance if for example unable to sell a property on the market etc

Commercial Real Estate / Property Sector
Product Wholesale
Manufacturing
Engineering / Fabrication
Transport / Haulage
Recruitment

Marketing / Advertising
Printing
Security / Man Guarding
Reactive Maintenance
Cleaning
Telecommunications

Food/drink
Breweries
Computers / Technology
Recycling / Waste management
Clothing / Fashion
Events management

By CEO, GIC Capital

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