Bridging finance explained: What would you use it for?

  • Bridging Finance
bridging-finance-2

Due to the coronavirus pandemic, more and more businesses and developers are looking for finance to fund their projects. Whether this is to prepare for a ‘return to normal’ or to simply keep their businesses afloat through the lockdown period, there is certainly a need for quick and easy access to funds.

As finance specialists, we’re able to help you gain access to bridging products and other financial solutions such as semi-exclusive commercial mortgages and business buy-to-lets. Similarly, we can also provide access to the funds needed for residential bridging and refurbishment projects.

If you’re looking to secure fast, short-term finance, then a bridging loan could be the solution you need.

 

What is bridging finance?

Bridging finance or a bridging loan is a short-term solution used to provide you with funding needed to make a purchase or fund a project while you’re waiting for traditional funding to become available.

A bridging loan can be available to you within weeks if not days of a successful application, which makes it an ever-growing popular funding solution.

 

What types of bridging loans are available?

Whether you’re a commercial business or just interested in property development or refurbishment, it’s crucial to ensure that you apply for the right type of loan. This loan should not only fit your funding requirements, but also provide you with a realistic and clear repayment plan.

With that in mind, the two types of bridging loan are:

 

Closed bridge loan

The borrower will have a set date in place for when the loan will be repaid. As an example, a property developer could be waiting to complete a sale on a property that will then be used to repay the bridging loan.

 

Open bridge loan

The borrower has no definitive date to repay the bridging loan but will have an agreed exit plan in place.

 

What do you use bridging finance for?

Bridging finance can be used for several reasons but the most common are:

  • Property development
  • Buy-to-let investing
  • Businesses raising capital
  • Businesses paying for machinery and or IT equipment
  • Home buying
  • Auction purchase
  • Chain breaks
  • Re-bridge
  • Refurbishment
  • Regulated refinance
  • Unregulated finance

 

For example, you may choose to use a bridging loan if you are a business looking to settle tax liabilities and/or other hefty expenses such as paying for new machinery or IT equipment. Alternatively, perhaps you’re a BTL landlord struggling to raise funds for improvements to your properties?

Either way, high street lenders are not always a viable solution for providing the funding needed promptly, if at all. This is where bridging finance is the ideal solution.

 

Bridging loans for property development

Typically, in this scenario, you’d be looking to buy a property to develop and sell quickly within a short period but cannot access the finance needed.

Bridging loans can support your property development project, as you are able to secure the finance needed throughout your renovation.

Property developers would usually benefit from a closed bridge, as the sale of that project will be used to repay the bridging loan.

At Finance 4 Business, on a simple bridging loan, we can obtain terms from some lenders within an hour or two.

 

Why do I need an exit strategy?

Bridging loans are intended for short-term use and as such, lenders will want to know you have a plan in place to repay the loan before they accept your application. This is known as an exit strategy or exit plan. A crucial plan to have to avoid running into difficulty later on, an exit strategy would normally come via sale of property or refinance.

 

Finance 4 Business

As both residential and commercial bridging specialists, we understand the importance of evaluating your requirement to provide you with the ideal solution.

If bridging finance is the right option for you, we will source the market to find you a deal that meets all your requirements.

Our experience, knowledge and service provide us with the right skills to supply expert advice and offer a range of bridging products to enable you to move forward.

Please call one of our dedicated advisers on 0121 309 0444 or email enquiries@f4b.biz to find out more.