We saw a recent example where, due to pressure from the bank, the solution resulted in a £2m high street remortgage on one property, and a short-term bridging solution involving several buy-to-let properties.

Being involved in the commercial, bridging and second charge camp, we see the benefit of second charges as a facilitating product to make the rest of the deal work. Sometimes a straightforward second charge can provide the solution to a deal that otherwise won’t fit.

As such seconds are an area commercial brokers would do well to take a longer look at. Indeed, even if you don’t have regulated mortgage permissions, you can still provide your clients a regulated second charge option on an introducer-only basis.

Let’s look at some examples of the kind of blended commercial finance solutions you could offer your clients.

Overall, borrowers tend to have greater available equity in their residential home hence there’s more opportunity to capital raise with regulated seconds. However, at the last count there were 14 lenders offering second charge products on buy-to-let properties and there are even lenders offering non-status business loans on a second or third charge basis.

We often see clients raising capital via a second charge loan secured on a residential or buy-to-let property for deposits on a new buy-to-let, business expansion, to settle tax bills or to repay other business deb

Often a commercial remortgage doesn’t make sense due to the costs involved or because of background factors, such as adverse credit being an issue. Second charges can come to the rescue with rates from under 4% for prime cases through to plans accepting unlimited CCJs and defaults. There are even loans available to clear debt management plans and bankruptcies which can act as a credit repair vehicle prior to a larger restructure in the future.

We frequently see second charges used to make up the shortfall when the primary restructure can’t raise the full amount required. Without the extra cash raised by the second charge, the overall deal would simply fail.

•   Amicus opens new Manchester office
•   Castle Trust completes second charge bridge in two weeks
•   HFBS completes second charge bridge in one week

When bridging, a second charge bridge may work out far cheaper than taking out the existing first charge. Also, if affordability isn’t an issue, consider a second charge term loan instead – you will get far higher LTVs, lower rates and some lenders don’t charge early repayment charges on non-regulated loans. A term loan also takes the pressure off your client to refinance. If their initial plan falls through, they won’t find themselves facing soaring costs as would be the case with a bridging loan if kept for longer than originally planned.

If brokers don’t have permissions to advise and arrange regulated second charges based on their non-regulated fact find, there is nothing to stop them talking through some scenarios with a second charge master broker prior to making an introduction.

There are, of course, Financial Conduct Authority (FCA) rules to abide by in these circumstances. Make sure the master broker has permissions to give advice on regulated second charges and procedures in place to deal with unauthorised introducers. You can check the status of the master broker by visiting the FCA register.

Transparency is key. Be sure to inform the borrower before the introduction of any commission you will receive. The FCA has made it clear that unregulated introducers must not receive any money in connection with any transaction the client enters into with the authorised party, however, this doesn’t include payment legitimately owed to you as a result of the introduction – ie your commission.

You’ll also need to make the client aware of any professional ties you may have to the master broker, for example, if you’re part of the same parent company or group, to avoid any conflict of interest.

And as an unregulated introducer you must not engage in “advertising or in the presentation, offering, preparatory work or conclusion of the regulated mortgage contract”.

For some, being forced to step away from the regulated sale process may be difficult. But if you understand the FCA’s rules on the matter and get comfortable with them, this could open up better outcomes for your business clients and an additional income stream for your business.