Bridging finance helps borrowers to effectively “bridge” the gap between the purchase of one property and the sale of another. It is a relatively modern type of financing, which can be great for businesses to help cease certain opportunities in sensitive timeframes.A bridging loan is a type of secured loan, and will always be secured against a particular set property such as a commercial building or your office premises. You’ll usually find these types of loans offered with private lenders as opposed to banks, and they can give you certain flexibility other loan types are not able to afford – including flexibility on rates and terms, as well as different backgrounds and credit histories.
Should I Use Bridging Finance for Business?
Typically, bridging finance is used by developers for property-related developments. It helps them to purchase and/or renovate properties both residential and commercial. With these types of developments, a substantially large lump-sum payment is typically required up front. A bridging loan can help to provide this money temporarily, enabling developers to start on a project quicker.
Where Can I Access Bridging Finance?
There are more than 50 bridging lenders in the UK which is made up of private lenders, challenger banks and even some individuals. Some of the best known lenders in this space include MT Finance, Together Money, Masthaven and Precise Mortgages. There are certain banks that offer bridging finance too, but it is not at the centre of their business proposition.Supporting this business is hundreds and hundreds of bridging brokers who will often search the market on your behalf and find a lender who can approve your loan on the best terms, taking a commission of 1% or 2% as part of the arrangement.
What Costs Are Involved in Bridging Finance?
The costs associated with projects that involve bridging finance can include:
Property valuation fees (up to £1,000 for a standard 4-bed property)
Solicitors and general admin fees (several thousand depending on size of the deal)
Late payment fees can also be incurred if the borrower does not keep up with repayments on the loan. This can also happen if repayments are made too early, potentially resulting in early repayment fees. The costs associated with any bridging loan will depend on the lender you go with and the terms of the loan you take out. Therefore, it’s important to review and understand all of the costs associated with a bridging loan (and any other loan for that matter) before taking one out.
Is Bridging Finance Right for Me?
Whether or not a bridging loan is right for your business depends on your situation and the circumstances in which you find yourself needing such a loan. For those with a set project in mind that’s time sensitive, and who have a clean and clear exit plan, a bridging loan may be a good option to consider – whereas those with more general commercial projects that aren’t too pressed for time may be best looking for other types of finance. Bridging loans differ from more traditional loans in a number of ways, including the following: Best for short-term endeavours: bridging loans are typically intended as a short-term means of finance, and therefore are best suited to short-term needs of funds.Good for those who need quick access to funds: bridging loans are known for their quick access to funds once approved. Often, access to funds only takes a number of weeks.