1) Tax hurdleYou mortgaged yourself to the hilt to start a successful electronics business. After three years you agree to sell it for £400,000. A couple of years later, the taxman decides that the proceeds, subsequently invested in another electronics venture, were not an investment in a "comparable" business and hits you for 40 per cent capital gains tax. HMRC give you 28 days to pay £160,000 or face bankruptcy.
2) Messy divorceA divorce court judge decides that your ex-spouse is entitled to half the house, half your business, half your income and half your liquid assets. You decide you’d quite like to stay in the house and keep control of your business. You need £500,000 to run on the spot for three-or-four months, until you can reorganise your life, your business and your borrowings.
3) Evasive actionThe house on the plot adjoining yours comes up for auction. A week before the auction you learn that a developer wants to buy it and convert it into a hostel. You are not keen on the idea and want to buy it yourself to refurbish and sell on as a family home. You need £750,000 to put in a winning bid, acquire the property and raise a mortgage on it. This process will actually take about six weeks. You only have six days.
4) MisfortuneYour business partner has a heart attack and expires prematurely. His estranged widow, with whom you’ve never seen eye-to-eye about anything, suddenly owns half the business. She insists on having a say in the running of the business. If you don’t buy her out, your life’s work will soon be in ruins. You need £1.5m in a big hurry to buy her out before your biggest customers discover what’s happening.
5) Un-missable opportunityYou are offered a plot of development land next to a planned golf course. You know its value will soar in the next three years when the prestigious golf course opens. You need £1.2m to buy the land and a year to sort out the planning permissions and other legalities. Once these are in place the land will be worth double what you paid for it. You haven’t got £1.2m.
6) Striking hot ironsYou know the large quoted corporation you work for has ambitious expansion plans and you’d like to share in its growth. You also know its shares are temporarily undervalued. You’d buy as many shares as the equity in your house would permit. £250,000 would be sufficient but re-mortgaging your house will take weeks. You need to strike while the iron is hot.
7) Administrative delaysA family member sadly departs bequeathing her converted barn in Hampshire to youin her uncontested will. It’s worth £1.5m. Gallingly, you also need an extra £1m working capital now to finance a brilliant overseas order. The probate and property sale process will take at least six months and you need the capital now. Your bank is being typically pedantic.
8) Hard knocksYou have a sound, established small business (and own the factory) but you’re perhaps a bit too trusting. A close friend’s business folds, owing you £250,000. Friend or no friend, you know you won’t get your money. It’s enough to drag your business down with it. Your bank gets cold feet and threatens to withdraw your overdraft facility. You need to replace the £350,000 working capital facility more of less immediately to pay the staff salaries, stock and overheads, before reorganising your borrowings.
9) ConsolidationYour main competitor decides to retire and his business suddenly comes on the market. The management team is trying to mount an MBO. If you can lay your hands on enough liquidity to acquire it, you will double the size of your business overnight. With economies of scale, the two businesses together will be worth a lot more than they would separately. You’ll need access to £2m within a couple of weeks to get in first and close the deal.
10) The SIPP Gap You wisely decide to buy new business premises through a Self Invested Pension Plan (SIPP) so that you’ll be paying for your retirement instead of paying a landlord. The completion date looms, but delays – due to forming a SIPP, VAT registration, having the necessary insurance policies and leases in place and meeting commercial mortgage criteria – threaten to scupper the purchase. You need a substantial lump sum in a hurry to complete the acquisition. Bridging finance is the ideal short-term solution, especially for the recoverable VAT element of the transaction.Chris Baguley is the managing director of Bridging Finance Limited, which specialises in making short-term, secured and fixed-rate bridging advances.