Unlock your purchasing power with VAT funding

Leveraging VAT funding to buy larger commercial premises

How you can turn £2 million into £3 million of property with VAT funding

VAT funding can maximise your organisation’s purchasing power as you pursue property acquisition opportunities in 2024.

Incisive strategic financial decision-making is pivotal to the success of investment and development companies, especially when operating in an uncertain economic environment.

One often-overlooked aspect of financial decision-making is the efficient utilisation of equity, particularly when it comes to the impact of funding VAT on a property acquisition.

This article walks you through how VAT funding can drastically improve your purchasing power.


Purchasing without VAT funding

Let’s break down the numbers to understand the tangible benefits of VAT funding.

Consider a scenario where you are acquiring a property subject to VAT, and you opt for a 60% Loan-to-Value mortgage.

With £1.2 million in equity earmarked for the purchase, traditionally you would secure a £1.2 million mortgage, allocating £800,000 to the property and £400,000 to HMRC.

Deciding not to take out a bridging loan for your VAT obligations means your organisation can therefore purchase a £2 million premises.


VAT Funding in action

Rather than tying up a significant portion of your capital for VAT obligations during a property purchase, VAT funding can enable you to redirect those funds towards larger properties that deliver higher productivity and revenue generation.

By leveraging our VAT funding provision, you can channel the entire £1.2 million towards the property acquisition.

This strategic move enables you to secure a £1.8 million mortgage at a 60% LTV, with £600,000 designated for the HMRC payment – which is covered by a tailor-made BloomSmith VAT bridging loan.

Consequently, your purchasing power expands from the initial £2 million to an impressive £3 million, creating a 1.5x increase in your purchasing power.

Read more: VAT funding explained


Cost-effective property expansion

While there are many benefits to financing your VAT payment, including mitigating your purchase’s cash flow impact, it also enables cost-effective purchasing.

Increasing your purchasing power comes at a relatively minimal cost, starting from as little as 1.2% of the property purchase price.

In the presented example, this translates to just £36,000.

This modest investment can significantly amplify the value accessible to you and can help you yield substantial returns.


Seizing Opportunities in 2024

As confidence returns to the commercial property sector, VAT funding can be a valuable tool for capitalising on the opportunities that the market is set to present in 2024.

The ability to unlock additional purchasing power positions your business to make strategic acquisitions, capitalising on emerging trends and securing properties that align with your long-term objectives.

In the competitive landscape of commercial property investment, every financial decision can shape the trajectory of your business.

As we look towards the year ahead, VAT funding offers a winning strategy to maximise your equity, increase purchasing power, and seize lucrative opportunities.

If you would like to learn more about how VAT funding can help your company then please speak to our team today.

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