We all know that taking a bridging loan is going to be an expensive option. Yet, despite that, occasions often arise where bridging finance can make sense.
Perhaps you need to complete a building or refurbishment project, and you’ll be severely financially penalised for allowing your property to be sold part refurbished, with works outstanding, Perhaps you need to access funds very quickly to secure a business opportunity, or in cases where bank lending isn’t immediately available due to the “tick box” lending practices employed by banks in the modern era.
Whatever the reason, bridging loans serve a central purpose in providing rapidly accessible finance, and unlike banks, most bridging lenders assess a borrower based on the merit of the prevailing circumstances, rather than by using an arbitrary computer algorithm.
As a result, bridging loans are increasingly used as an alternative to mainstream lending by businesses and individuals alike. Arrangements such as these are designed to be repaid on a fixed date, and in the short term – often within 6 or 9 months. Bridging loans can usually be obtained quickly, but these loans are also typically very expensive, both in terms monthly interest, and the associated arrangement and “repayment day” fees.
Bridging loans are usually offered on a “secured” basis, such that the borrower puts forward collateral, often a house or business premises, which is then mortgaged to the bridging lender in support of the loan.
Sometimes bridging loans are taken by private limited companies, and in those circumstances, lenders usually stipulates that a director must stand as “personal guarantor”. If that applies to you click here for more details.
Why does Independent Legal Advice need to be sought?
Whilst bridging loans offer a valuable source of rapidly available funding, in circumstances where it may not otherwise be offered by mainstream lenders, bridging loans are usually an expensive option. As a result, lenders offering these loans need to be especially careful to be seen to be lending responsibly. They must take steps to ensure their borrower understands the full cost of borrowing, and the consequences of failing to repay the loan. Unless clear advice is given, the lender risks the prospect of the borrower seeking to avoid responsibility for the loan by arguing that they were not aware of the onerous loan terms offered.
Increasingly, therefore, bridging lenders are insisting, as a condition of making a bridging loan, that the borrower receives “independent legal advice” (ILA) from a solicitor. Once ILA has been taken by a borrower on the terms of a bridging loan, they will usually be unable to claim later down the line that they were unaware of the terms of the loan, and that they should not be bound by the loan.
Accordingly, these days, most bridging lenders require borrowers to take independent legal advice as pre-condition of them receiving a bridging loan.
There are many situations under commercial contracts or transactions where one of the parties involved may be concerned that one or more of the other parties could potentially claim, after the deal is done, that he or she did not properly understand the nature or consequences of the deal, or perhaps that he or she was under unfair pressure or influence from one of the other parties involved to go ahead with the deal. This could potentially result in litigation arising in connection with the contract after it has been completed.
In such situations, the way it is often seen as best to offset the risk of such a claim is to insist that the relevant party receives independent legal advice from a solicitor regarding the nature and consequences to the individual of the contractual arrangements, and to ensure that he or she is proceeding with full understanding, of his or her own free will and not as a result of undue influence from someone else.
At ILA-Connect, we are able to arrange the necessary independent legal advice on a bespoke basis. Just get in touch with us with the details and we’ll take it from there.
How can I obtain Independent Legal Advice?
If you need ILA on a bridging loan or other transaction, we can assist you. We’ll set up an appointment at a time to suit you with our panel solicitors, either online, or with a solicitor who is local to you who offers Independent Legal Advice, and they can then certify to your lender that the formalities have been dealt with, thereby enabling you to receive your bridging funding without delay.
At ILA-Connect, we’ve made it quick, easy and convenient for you to get ILA at a moment’s notice. Get in touch with us on firstname.lastname@example.org or call our office on 0117 908 7813 to book an appointment.
Alternatively, click here to get a custom quote for ILA.