Post by dave4 on Nov 16, 2021 13:31:14 GMT
New Product Launched VAT Loans. (E mail info below)
In addition to short term Bridge Loans and medium term commercial loans, Proplend has added a new product for both our Borrowers and Lenders, it’s called a VAT Loan.
VAT Loans are complementary to our existing loan products as they relate to commercial property but they differ by the fact that they are not secured or repaid in the same way.
In brief, if a commercial property investor purchases a property for £1m and the property is elected for VAT, then the investor needs to pay VAT at the prevailing rate (20%) on the purchase price plus the stamp duty. So on a £1m property purchase, the investor needs not only a c30% deposit but also needs to come up with an additional £207,900 of VAT at completion. This can have a major impact on the short term cashflow of the purchaser.
If the investor knows the property they are purchasing is elected for VAT, they will set up a new SPV (special purpose vehicle) and register that entity for VAT. What this means is, after purchasing the property and paying the VAT due at purchase, they can submit a VAT return to HMRC to have the VAT paid rebated. This process usually takes from 30-90 days and follows HMRC’s fundamental processes of VAT charging, VAT payments and VAT returns.
Proplend’s new VAT Loan product, enables the commercial property investor to borrow the VAT amount as a short term loan. It is structured the same way as a Bridge Loan, in that we lend a gross loan amount, deduct in this case 120 days of interest in order to pay Lenders their monthly interest, and then release the net amount to the Borrower.
As part of the due diligence process, the Borrower must appoint our nominated VAT Agent, who will work on behalf of the Borrower to submit the VAT return and liaise with HMRC to ensure a timely recovery of the VAT amount.
The difference between Bridge / Term loans and VAT loans are:
VAT loans do not take a 1st legal charge over the underlying property
Lenders are not relying on the property being refinanced or sold in order to repay the loan
the loan is repaid, when HMRC rebates the VAT amount paid by the Borrower back to Proplend’s nominated VAT Agent
Proplend will still produce a Full Loan Request, it will just read differently to a bridge or term loan FLR
in most cases the Borrower will have a different Lender supplying a Senior Debt Facility, but this could be Proplend
Lenders will rely on the Loan contracts, a personal guarantee from the director & shareholders of the Borrower for 100% of the loan amount and the HMRC process of VAT charging, VAT payments and VAT returns
VAT loans are shorter in term, up to 90 days
VAT loans will only have an additional one month’s interest reserve (loan term + one month)
VAT loans are not Tranched
given the short term nature of VAT loans, they will not be eligible for the PLE
In addition to short term Bridge Loans and medium term commercial loans, Proplend has added a new product for both our Borrowers and Lenders, it’s called a VAT Loan.
VAT Loans are complementary to our existing loan products as they relate to commercial property but they differ by the fact that they are not secured or repaid in the same way.
In brief, if a commercial property investor purchases a property for £1m and the property is elected for VAT, then the investor needs to pay VAT at the prevailing rate (20%) on the purchase price plus the stamp duty. So on a £1m property purchase, the investor needs not only a c30% deposit but also needs to come up with an additional £207,900 of VAT at completion. This can have a major impact on the short term cashflow of the purchaser.
If the investor knows the property they are purchasing is elected for VAT, they will set up a new SPV (special purpose vehicle) and register that entity for VAT. What this means is, after purchasing the property and paying the VAT due at purchase, they can submit a VAT return to HMRC to have the VAT paid rebated. This process usually takes from 30-90 days and follows HMRC’s fundamental processes of VAT charging, VAT payments and VAT returns.
Proplend’s new VAT Loan product, enables the commercial property investor to borrow the VAT amount as a short term loan. It is structured the same way as a Bridge Loan, in that we lend a gross loan amount, deduct in this case 120 days of interest in order to pay Lenders their monthly interest, and then release the net amount to the Borrower.
As part of the due diligence process, the Borrower must appoint our nominated VAT Agent, who will work on behalf of the Borrower to submit the VAT return and liaise with HMRC to ensure a timely recovery of the VAT amount.
The difference between Bridge / Term loans and VAT loans are:
VAT loans do not take a 1st legal charge over the underlying property
Lenders are not relying on the property being refinanced or sold in order to repay the loan
the loan is repaid, when HMRC rebates the VAT amount paid by the Borrower back to Proplend’s nominated VAT Agent
Proplend will still produce a Full Loan Request, it will just read differently to a bridge or term loan FLR
in most cases the Borrower will have a different Lender supplying a Senior Debt Facility, but this could be Proplend
Lenders will rely on the Loan contracts, a personal guarantee from the director & shareholders of the Borrower for 100% of the loan amount and the HMRC process of VAT charging, VAT payments and VAT returns
VAT loans are shorter in term, up to 90 days
VAT loans will only have an additional one month’s interest reserve (loan term + one month)
VAT loans are not Tranched
given the short term nature of VAT loans, they will not be eligible for the PLE
