Why are second charge loans a good option for businesses? Simple: they’re easy to understand, and without them, companies get stuck. Not being able to raise finance to grow or sustain growth will stifle and potentially harm your business. Often the bank isn’t able to help because you don’t meet their stringent lending criteria, and you may not feel comfortable negotiating other types of alternative finance product like invoice finance
. But that doesn’t stop you from needing to raise money to purchase new premises or pay an unexpected bill for example. A second charge loan is just one of several types of secured business loans
based on the equity in your property, and can solve unforeseen working capital problems, or form a key component of your overall business strategy.
What is a second charge loan?
As mentioned, second charge loans use your property’s equity as security. In the hierarchy of repayment priority, they are behind your mortgage and ahead of any subsequent ‘charges’ like third charge loans. Your mortgage provider gets paid first, the company that provided you with the second charge loan gets paid second – hence the name. For example, if you have a property worth £500,000 and you have a mortgage worth £100,000 then you have £400,000 equity. We would then be able to provide you with a loan based on the £400,000. It’s as simple as that!
Second charge loans are subject to credit checks and property checks, and naturally require you to have equity available in the property you want to borrow against. Circumstances will vary according to each individual agreement, and repayment can be spread out over a time period that suits your business.
Why would you need a second charge loan?
As we’ve mentioned, circumstances tend to vary. Our clients take out second charge loans for all sorts of reasons.
For example, a nursery we work with had ambitions to expand to a second location. Its paperwork was done and its licenses approved, but it was £200,000 short of what it required to purchase the new business property.
The director of the nursery had a £650,000 property and a £75,000 mortgage. She took out a second charge loan with Nucleus, using her house as security, and paid it back over a three-year period. This allowed her company to grow without taking on unsustainable debt or cannibalising the finances of the successful first location.
Another client – an accountancy firm – found themselves in danger of missing a £75k payment because of a delinquent debtor. To clear the payment, they took out a second charge loan against a £375k flat the director owned.
Why Nucleus Commercial Finance?
At Nucleus, we’ve lent larger and smaller sums to clients in many industries: we’ve helped commercial property developers and small bed-and-breakfasts; our secured business loans
have kept companies afloat during emergencies and helped them bring their long-term strategies to fruition. Our reputation as a second charge lender precedes us: when you borrow from Nucleus, you’re signing up for a flexible, transparent, and fair experience.
We can turn around your funding quickly and sort flexible terms; we can lend your business up to £10m – and we won’t turn you down because you don’t tick one of thirty separate boxes. Our team is comprised of seasoned lending experts, who can serve in a hands-off or advisory capacity, and taking out one Nucleus loan doesn’t prohibit you from taking advantage of our other financial products – in fact they’re designed to work in concert.
To discuss second charge loans, or any other funding requirement, talk to
one of our specialists today.