Springfords LLP blog

Some news, views and comments about everything and anything, relevant and irreverent.

Alternative Lending Alternative Debt

24 May 2016

With bank lending and mortgage funding having become notoriously difficult to secure, young people are finding other ways to fund business ambitions and personal dreams. 

Those of us with teeth long enough remember when that first step on the ladder, be it property or business, was almost always backed by money that came from a friendly source.  A loan from home is something that’s not new to many of us, and the Bank of Mum and Dad is just the thing we’ve all been doing for decades..

“Parents will have a helping hand in about a quarter of all home loans this year,” says Barbara Armstrong, the proprietor at Edinburgh Property Finders, who discreetly help clients move, buy and sell bespoke properties in and around Edinburgh and beyond. (she also happens to be a client of Springfords by the way!)

“Lending has become much more tight in the years since the financial crash,” she says.  “Couple that with historically high house price to earnings and that means that more and more people are looking for alternative ways to finance their purchases.  That’s all well and good, if there’s a benign friend or family source, where terms might be favourable or even informal, but it can mean many others turning to alternative means of raising finance, where the repayment implications can be much more onerous.”

If the internet is to be believed - and who did the internet ever lie to - getting alternative funding, for anything, has never been easier.  A tweet to the crowd for some funding; a quick justGiving(to me) webpage; or a kick up your starters posting and, before you know it, everyone is your friendly funder.

Money for nothing?  Not quite.  Whoever funds your venture, whether a dream home or a business dream, will only come true for you, if it comes true for your backers as well.  That means everyone who hands over their cash to you, is, sooner or later, going to want their cash back too, and then some.

At Springfords, we can’t tell you which loan or funding package is best for you - there are some regulations about handing out financial advice these days.  What we can tell you is just how sweet is that rosy deal, and whether or not there’s any barbed wire in the bouquet.  Don’t get overcome by the heady scent of raising the cash, we’ll help you spot if you’ve taken into account all the obligations you’ll have to meet to pay back everyone who’s so eager to see your dreams flower.

“I've had a number of clients over the years buying property in Edinburgh for their kids at university and college.  That’s quite typical and many parents see that as a good investment,” says Barbara Armstrong.  It maybe even gets the kids used to doing their own washing too. 

Now, that they’ve graduated into fabric care and tumble drying, there’s a growing army of young adults turning to parents once again for their next step into property ownership.  “It’s maybe the size of loans that make things different these days,” says Barbara, who recently gave her observations to the Financial Times.  “Five figure loans and literally billions a year makes Mum and Dad a real player in the lending arena.  Some reports put them up in the top ten of UK lenders.  That’s a real force in the economy.”

Making clients aware of the cost implications of borrowing of any sort, and the tax obligations too, is what Springfords is all about.  We’re all part of the family here, and when you come to see us, we don’t mind if you bring mum and dad with you.  We’ll help with most things, but just don’t bring your dirty washing along.  We do draw the washing line there.

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springfords blog

Some news, views and comments about everything and anything, relevant and irreverent.

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