Can I arrange a revolving credit facility on a property held in an SPV or limited company?

Can I arrange a revolving credit facility on a property held in an SPV or limited company?

Many UK property investors hold their portfolios within a Special Purpose Vehicle (SPV) or limited company. This structure can offer significant tax advantages, especially when it comes to interest relief and inheritance planning. However, when you need to unlock cash from these properties to expand your portfolio or fund repairs, finding the right financial product can be challenging.

You might ask: can i arrange a revolving credit facility on a property held in an spv or limited company?

The short answer is yes. You can typically arrange this type of secured facility on a buy-to-let (BTL) property owned by an SPV or a limited company. At Promise Money, an FCA-authorised broker (Ref: 681423), we help landlords navigate these options. This product works like a property overdraft, sitting as a secured second charge behind your existing first-charge mortgage. It is not an unsecured business loan, a personal credit card, or a generic business credit line. Instead, it is a secured financial tool designed specifically for BTL property investors.

What is an SPV and How Does This Secured Facility Work?

An SPV is a simple limited company set up solely for the purpose of holding and managing property, as defined by the UK government’s Companies House. Because the company’s sole activity is property, many specialist lenders are highly comfortable offering secured facilities against these assets.

A BTL revolving credit facility allows you to secure a borrowing limit against your company-owned property. Once set up, you can draw down funds, repay them, and draw them down again as often as you like, without needing to reapply each time. Crucially, interest is only charged on the money you actually draw down, not on the entire facility limit. This makes it highly cost-effective for managing cash flow.

For example, if you have a facility limit of £100,000 but only draw down £20,000 to cover an urgent refurbishment, you only pay interest on that £20,000. The remaining £80,000 sits ready for you to use whenever another opportunity arises, entirely interest-free until drawn.

Understanding the Risks of Secured Borrowing

While the flexibility of a revolving credit facility is highly appealing, you must understand the risks involved with secured borrowing.

Your property may be at risk if repayments are not made. This could lead to serious consequences, including legal action, repossession of the property, increased interest rates, and additional charges.

Because the facility is secured as a second charge, the lender has the right to take possession of the property to recover their funds if you default. Furthermore, defaulting on a secured facility will negatively affect your company’s credit profile and your personal credit rating as a guarantor. This makes future financing significantly harder and more expensive to secure, which could severely impact your ability to grow your property portfolio.

How it Compares to Bridging Finance and Remortgaging

When limited company landlords need capital, they typically look at two alternatives: bridging finance or remortgaging. Let us look at how a revolving credit facility compares to these options.

Bridging loans are excellent for short-term, single-use transactions, but they work differently. They can be “closed” (with a fixed, guaranteed exit date and strategy, such as a pending sale) or “open” (where the exit date is flexible but typically capped at 12 to 18 months). Most bridging loans roll up interest rather than requiring monthly payments, meaning the debt grows until redemption. Bridging loans can also be expensive to set up, and once you repay the loan, the facility is closed. If you need funds again, you must go through the entire application process and pay setup fees all over again. In contrast, a revolving credit facility remains open, allowing you to draw and repay multiple times.

Remortgaging to release equity is another common strategy, but it has drawbacks. If you have a highly competitive first-charge mortgage on your SPV property, remortgaging forces you to break that deal. This can result in costly early repayment charges (ERCs). Even worse, you might have to replace your cheap interest rate with a much higher current market rate. A secured revolving credit facility acts as a second charge, meaning your existing first mortgage remains completely untouched.

Real Landlord Scenarios

How do SPV landlords use this facility in the real world? Here are three common scenarios where this tool proves invaluable:

• Auction Purchases: When buying a property at auction, you typically need to pay a 10% deposit immediately and the remaining 90% within 28 days. Arranging a traditional mortgage in this timeframe is almost impossible. With a revolving credit facility already in place on your existing SPV property, you can typically draw down the required funds within 24 to 48 hours to secure the auction property.
• Refurbishments and EPC Upgrades: The UK government continues to push for higher Energy Performance Certificate (EPC) ratings on rental properties. Landlords often need to fund insulation, new boilers, or double glazing to keep properties lettable. A revolving credit facility allows you to draw down the exact amount needed for the refurbishment and repay it once the property is re-valued or tenants begin paying rent.
• Bridging Gaps and Void Periods: If a tenant leaves unexpectedly, you still have to pay the first-charge mortgage. You can use the revolving credit facility to cover these void periods, drawing only what you need and repaying it once a new tenant is secured.

What Lenders Look For When Approving SPV Facilities

When applying for a secured revolving credit facility through an SPV, lenders will look at both the company and you as a director. Even though the loan is secured against the property, lenders still want to ensure you have a reliable track record.

They will typically require a personal guarantee from the company directors. This means you agree to take personal responsibility for the debt if the company fails to pay. Lenders will also assess your personal credit file to ensure you have a history of managing debt responsibly. Get your free credit search here. It’s free for 30 days and costs £14.99 per month thereafter if you don’t cancel it. You can cancel at anytime. (Ad)

The company must be registered in the UK, and the property must have sufficient equity. Because the revolving credit facility is a second charge, there must be enough value left in the property after subtracting your first-charge mortgage to secure the new facility limit.

People also asked

Can I get a revolving credit facility on a personal name BTL?

Yes, these facilities are widely available for properties held in your personal name as well as those held in an SPV. The underwriting process will focus directly on your personal financial circumstances rather than company structures.

How quickly can I access funds once the facility is set up?

Once the initial secured facility is fully arranged and legal charges are registered, you can typically draw down funds within 24 to 48 hours of making a request.

Do I pay interest on the whole limit of a revolving credit facility?

No, you only pay interest on the money you have actually drawn down and are currently using. Any undrawn portion of your facility limit does not incur interest charges, making it highly flexible.

What is the difference between a first charge and a second charge loan?

A first charge is the primary mortgage on the property, which gets paid first if the property is sold. A second charge, like this revolving credit facility, sits behind the first mortgage, meaning the second lender has a subordinate claim to the equity.

Can I use a revolving credit facility to buy another property?

Yes, many landlords use the drawn funds from their facility as a deposit to purchase new investment properties, allowing them to expand their portfolio quickly without waiting for a remortgage.

Securing Your Next Step with Promise Money

Arranging a revolving credit facility on a property held in an SPV or limited company is a highly flexible way to manage your portfolio’s cash flow. It combines the speed of bridging finance with the flexibility of an overdraft, all while keeping your existing first-charge mortgage intact.

As an FCA-authorised broker (Ref: 681423), Promise Money can help you compare available options and find a solution tailored to your investment goals. For more details on how we can assist, visit our hub at promisemoney.co.uk/landlord-revolving-credit-100 or call our team of specialists directly on 01902 585020. Remember, secured borrowing carries risks, and it is crucial to seek professional guidance before proceeding.