The lender, which launched last week, can help property investors at risk of losing out on an investment with its unsecured funding service to cover the VAT on a building purchase.
BloomSmith came to the aid of a property trader when the requirement to pay VAT emerged at a very late stage in the transaction, after the exchange of contracts.
The trader was already stretched for funds and the mortgage lender had refused to go higher on the LTV.
BloomSmith solved the issue by providing a last-minute facility to cover the full cost of the VAT, which allowed the transaction to go through and save the client from losing their deposit.
Rory Brown, of BloomSmith, said the client had nowhere else to go.
“Without us he simply didn’t have the funds and was going to have to pull out of the contract and lose his deposit.
“Again these guys trade on small amounts of personal equity so it’s really important they can find funding for the big ticket items like VAT, especially if it’s as straightforward to use as BloomSmith.”
The lender also helped out a medium-sized residential developer who had to pay VAT on the purchase of an empty office building he was planning to convert to residential units under permitted development rights.
The client had yet to deal with VAT at that point of the transaction, and without the necessary funding the development would have been cancelled.
However, BloomSmith managed to provide a facility to cover all the VAT payable, which allowed the developer to put forward a fully funded offer that included development costs, instead of having funds tied up with HMRC.
Rory explained that BloomSmith was useful as developers are normally so stretched on finance as it is and they don’t want that sort of cash tied up when it could be used for building.
“They typically put in minimal capital, borrowing the large portion of site costs as well as the development costs, so VAT is a massive bill to swallow.
“The difference in having that money sitting with HMRC can be the difference between a viable project and an enviable one.”
The final beneficiary of BloomSmith was a business owner who had an established company purchasing larger premises.
It was, however, significantly limited by the extra budget requirement for VAT as the property was to be bought by the directors through an LLP and none of them had experience in commercial property.
Fortunately, BloomSmith provided a facility to allow them to transact much earlier without having to build up cash that would temporarily sit with HMRC.
BloomSmith took control of the VAT process and guided the client to ensure swift, efficient repayment of the VAT from HMRC.
“Not only were we the funder, we were piece of mind that the VAT was going to be handled correctly and they weren’t going to get caught out,” Rory added.
“The business would have eventually built up the capital for the VAT, but by providing it for them we helped them get there months or years earlier.”