Your Client Needs £500,000 of Liquidity: Should Property Finance Enter the Discussion?

The Client Situation

A profitable owner-managed business has secured an acquisition opportunity. Completion is required in ten weeks. The trading company has retained cash, but using all of it would leave inadequate working capital. The shareholder owns an unencumbered commercial property through another company and has equity in their home and rental portfolio.

Several superficially plausible answers appear: extract company cash, raise a commercial mortgage, refinance buy-to-lets, remortgage the home, use a second charge or bridge against the commercial asset. Each route places debt and cash in a different legal place, with different tax, affordability, security and repayment consequences.

The accountant’s role is not to select a mortgage. It is to define the liquidity problem accurately enough for the alternatives to be compared.

Establish Four Facts Before Discussing Property Finance

1. The exact net amount

“£500,000” may exclude tax, fees, VAT, works, professional costs or a contingency. The broker needs the net funds required after redemption and finance costs.

2. The economic purpose

The lender will distinguish acquisition, working capital, property investment, refurbishment, development, debt consolidation, tax payment and shareholder use. Some purposes fit particular secured products; others narrow the lender pool.

3. The date and duration

Is the money needed in four weeks, three months or next year? Will it be repaid from a known receipt in nine months, from business cash flow over ten years or from selling an asset?

4. The entity that needs the cash

The security owner, borrower and cash recipient may be different. That can introduce guarantees, third-party security, intercompany agreements, distributable-reserve questions and tax consequences.

Possible Property-Backed Routes

The alternatives should also include non-property routes and doing nothing. Bank working-capital facilities, asset finance, private credit, vendor finance, investment liquidation or company cash may be more appropriate. Willow’s role is to ensure property finance receives a fair comparison where it genuinely fits.

Which Property Should Carry the Debt?

The asset with the most equity is not necessarily the best security. Assess:

• legal and beneficial ownership;
• current value and existing charges;
• rent, lease covenant or business occupation;
• ability to service interest and capital;
• property type, location, condition and marketability;
• planned sale, redevelopment or succession;
• early-repayment charges on existing borrowing;
• whether the asset is personally or corporately owned;
• the consequences of enforcement for the family or business; and
• the value of keeping one asset unencumbered.

A home may support competitive borrowing but introduces personal affordability and puts the residence at risk. A let commercial property may be assessed primarily on rent and tenant covenant. Owner-occupied premises tie the security decision to trading performance. A rental portfolio may offer diversified security but bring portfolio-level underwriting.

Aldermore’s current intermediary criteria illustrate the commercial range: it publishes commercial mortgage facilities from £500,000 to £3 million, up to 75% LTV, across commercial, semi-commercial, residential-investment, industrial, office and retail property, with several repayment options. That is one lender’s current appetite, not a general promise of eligibility.

What a Lender Is Likely to Examine

Security value and leverage

The lender instructs a valuation and applies maximum LTV and loan-size rules. The £500,000 requirement may need substantially more than £500,000 of property value.

Debt service

Commercial investment lending may focus on rent, lease term and tenant quality. Owner-occupied lending may analyse EBITDA, cash flow and business resilience. Residential and buy-to-let routes apply their own affordability or rental stress tests.

Borrower and ownership

The lender needs the corporate structure, shareholders, directors, guarantors and any offshore, trust or connected-company relationships. The borrower may need to be the property owner, or third-party security may require specialist approval.

Purpose of funds

The purpose must be lawful, plausible and acceptable under the chosen product. Evidence might include a purchase contract, completion statement, tax demand, debt schedule, works plan or acquisition memorandum.

Repayment or exit

For term lending, the lender tests ongoing service and ultimate repayment. For bridging, it needs a credible, timed exit such as refinance, sale or a documented liquidity event.

Personal exposure

Corporate borrowing may still require personal guarantees. The amount, scope and independent-legal-advice requirements should be understood before the client commits.

The Accountant’s Comparison: Borrow, Extract or Sell?

The broker can calculate finance availability and cost. The accountant helps compare it with the client’s alternatives.

The outcome may be a blend: use some company cash, borrow a smaller amount and preserve a working-capital reserve. Property finance should not be used merely because property exists.

When Bridging Finance May Enter the Discussion

Bridging can be relevant where the client has a genuine deadline and a clear repayment route but cannot complete long-term finance in time. Examples include acquiring a property before another asset sells, completing an auction purchase, buying an unmortgageable asset before works or covering a defined delay in a refinance.

A bridge is not a substitute for an exit plan. Before recommendation, the adviser should establish:

• the gross and net loan after retained interest and fees;
• all security and guarantees;
• the term and default consequences;
• whether planning, works or legal conditions control the exit;
• the refinance lender’s likely criteria after the event;
• the sensitivity to lower valuation or delayed sale; and
• a secondary exit if the primary plan fails.

If the liquidity need is long term and the security is already suitable for term lending, a commercial mortgage or refinance may provide a more appropriate cost structure than bridging.

What to Include in an Anonymous Case Outline

Later underwriting may require accounts, management information, forecasts, bank statements, leases, tenancy schedules, redemption statements, tax or debt evidence, purchase contracts and valuations. The request should follow the selected route rather than asking the accountant for every document at the outset.

An Illustrative £500,000 Liquidity Need

A business owner needs £500,000 to complete an adjacent commercial-property acquisition and initial works. They own their home, three rentals and a let commercial asset in a separate company. The trading company could fund the purchase, but doing so would reduce working capital below the accountant’s preferred buffer.

The team compares four options:

1. a dividend or other personal extraction, modelled by the accountant;
2. a residential capital raise, subject to personal affordability;
3. refinancing selected buy-to-lets, subject to rent and portfolio stress; and
4. a commercial mortgage against the let asset, based on value, lease and tenant covenant.

The commercial asset produces sufficient rent and has no mortgage. A term facility can meet the amount without disturbing the home or refinancing several rentals. The receiving entity will borrow the funds through a documented connected-company arrangement advised by the accountant and solicitor.

The solution is not chosen because the asset is unencumbered. It is chosen because security, cash flow, purpose, term and ownership can be aligned with a credible repayment plan.

Where the Professional Boundaries Sit

The accountant defines the cash need, models extraction and sale alternatives, tests working capital, prepares forecasts and advises how money can move between the client, trading business and property entities.

Willow identifies suitable secured-finance routes, assesses affordability, security, lender criteria, guarantees, term, fees and exit, and recommends an appropriate solution.

The solicitor advises on charges, priorities, corporate authorities, guarantees, intercompany documentation, acquisition contracts and title. A valuer assesses security and, where relevant, market rent or investment value.

The accountant should involve Willow before presenting property finance to the client as the answer. The finance review may confirm it, reduce the required borrowing or show that another route is more suitable.

Common Mistakes to Avoid

• Starting with the property instead of the liquidity need: purpose, term and repayment should drive the route.
• Assuming equity equals borrowing: LTV, affordability and lender purpose still apply.
• Securing the home by default: personal risk and regulated affordability require careful comparison.
• Using a short bridge for a long-term need: refinancing risk can make temporary money expensive.
• Ignoring which entity needs the cash: onward movement can create tax, legal and lender issues.
• Comparing interest rate without fees and exit: net proceeds and total cost matter.
• Promising a completion date before valuation and legal work: property finance has dependencies.
• Borrowing the maximum: unused secured debt can weaken future resilience.

When to Involve Willow

An early anonymous discussion is particularly useful where:

• the client needs £250,000 or more for a defined transaction;
• using company cash would weaken working capital;
• the client is asset rich but has irregular conventional income;
• property and the cash recipient sit in different entities;
• the deadline may require bridging;
• commercial property is available but has unusual ownership or tenants;
• the client wants to limit personal guarantees;
• several properties could provide security;
• a tax payment, acquisition or refinancing creates a fixed date; or
• the client is considering selling an asset solely to obtain liquidity.

No client name is needed initially. Share the amount, purpose, date, term, repayment source, proposed security, ownership and known debt.

Relevant Willow Case Evidence

For a portfolio-company route, see the related guide on releasing equity without selling property assets.