With the market for bridging loan funding growing rapidly with lots of lenders striving to meet the demands of clients, this article spells out what is involved.
Basically, a bridging loan is a short term loan to meet a finance need.
Traditionally, these bridging loans were used by people wanting to buy a property while waiting for their own home to be sold so the finance provided a ‘bridge’ between the borrower’s need to spend money before they receive money from a house sale.
The market has developed in recent years and bridging finance is used for a wide range of purposes including buying property and land as well as for businesses buying stock for a busy period.
The amount being loaned by bridging lenders range from several thousand pounds to several million pounds; depending on the borrower’s needs.
Short term bridging loan
A short term bridging loan can last from anything from one day to two years and can be provided quickly depending on the relationship between the borrower, the bridging loan broker and lender.
In addition to buying property, bridging loans are also being used to develop property, buy property at auction and some borrowers use the money to pay a tax or VAT bill.
Others use the money for a business cash injection or help expand a business.
Also, the types of property bridging finance can be used for covers just about every potential from residential properties to hotels and guesthouses as well as shops, offices and guesthouses.
It’s also possible to use bridging finance for buying land, redeveloping a property or for buying retail units or a leisure complex.
Bridging loan rates clearly advertised
Most bridging loan lenders have a quick process in place for accepting applications with their bridging loan rates clearly advertised to meet a wide variety of needs and they can do a quick decision if it’s crucial – some bridging loan finance firms can make a decision within two hours, for instance.
Other attractions for bridging finance include not having early redemption or exit fees.
Property developers are particularly attracted to bridging finance not just for the ease of accessing large amounts of money quickly but also because they can use the money for a property that’s in a poor condition which most traditional lenders will not provide a loan for.
In addition, depending on the agreement, the bridging loan may not have to be repaid on a monthly basis and the lender may accept a final repayment on the loan’s full term and they may also agree to ‘roll up’ the interest charges as well so they are paid with the loan itself when the exit date falls due.
For anyone interested in bridging loan funding and has specific questions then the helpful team at The Bridge Crowd can help.