While the popularity of opting for a bridge loan is growing in popularity there is still some confusion about what bridge funding is.
It’s not just members of the public who are sometimes confused about bridging finance, it’s also businesses too.
So what are bridging loans? Basically, bridging finance is a short term business loan that helps to ‘bridge’ the gap between someone buy something and securing the money to pay for it – growing numbers use bridging finance to buy a property before their mortgage is agreed, for instance.
Obtaining a bridging loan
Obtaining a bridging loan essentially means obtaining finance so the borrower can make the step from A to B more easily.
Bridging loans are not just for a specific purpose but also for a general commercial purpose.
The other attractive proposition for bridging finance is that the bridging loan application can be completed by some lenders in less than 48 hours – and some can do it in just a few hours if there is an urgent need for the cash.
However, the best way of accessing bridging finance quickly is to use a specialist bridging finance broker.
The bridging loan broker will be able to complete the application form and choose the most suitable lender and also discuss what an open bridging loan and closed bridging loan is.
Essentially, a closed bridging loan has a fixed date when repayment is due whereas the open bridging loan does not put a set date on the agreement but a defined period for the loan to be repaid.
Big attraction for a bridge loan
The other big attraction for a bridge loan is that they can be used for a variety purposes; most bridging loans are for the renovation or purchasing property, for instance.
The finance for both residential and commercial purposes range from developing a property to sell on or simply adding a bedroom or bathroom to a home.
When considering bridging finance, the borrower will be asked about their exit plan since the lender will need to know its purpose, how long it will be for and how the short-term loan will be repaid.
This information will be vital because a lot depends on the borrower’s plans for the money and while most lenders will be enthusiastic about the plans, others may not.
Finally, to clarify an exit plan means the lender will want the loan to be cleared in full, along with interest charges, or whether it is going to be moved into a permanent loan, such as a fixed mortgage.
For help and advice about bridge funding, contact the helpful team at the Bridging Crowd.