The demand in the UK for bridging loan funding has grown steadily over recent years as more firms and individuals come to appreciate the potential for such borrowing.
Indeed, while short-term bridging loans have grown in popularity there is still some confusion about what they are and what they can be used for so hopefully this short series from The Bridge Crowd will fill those gaps.
Essentially, bridging finance is a short term business loan though it’s temporary in its aims and helps the borrower source funding to complete a particular need, for instance to buy property or purchasing a business.
Access to a short term bridging loan
This means they have access to a short term bridging loan until a more permanent source of finance is provided, for instance the borrower may have a mortgage approved, or they eventually access a lot of money to repay the bridge loan, for instance they may sell the property they bought by using a bridging loan.
In its simplest form the ‘bridge’ is a way to get a borrower from A to B in an effective way.
One reason for the rapid growth is that borrowers realise they can complete on a property purchase more quickly so they can secure their dream home.
Variety of bridging loan rates available
Typically, a bridging loan is short-term finance with a variety of bridging loan rates available and used when there is a gap between the sale and the completion dates in a chain.
People and developers buying property auction are also enthusiastic users of bridging loans and for those who simply want to own a property for a short period while they renovate and then quickly sell it on.
It also helps that a bridging loan can be used for someone to put in an offer for a property without having a buyer already lined up to buy their current property. Bridging loans are an excellent way to meet the need for short-term finance if the borrower is under pressure to exchange contracts on a new property quickly.
So, in theory at least bridging loans are different from ‘normal’ loans since they have a specific purpose for a short-term only. They also are available for a variety of purposes since most loans available are for more general commercial uses.
Another attraction for bridging loans
Also, another attraction for bridging loans is that the timespan between applying and having the application accepted, is much shorter. This means borrowers can get access to a large sum of money in a very short period of time – much more quickly than mainstream lenders can do, for instance.
It may take several weeks for mainstream lenders to agree a complete a term loan whereas a bridging loan provider can meet the borrower’s needs within 48 hours. Some lenders also pride themselves on delivering bridge loan funding within just a few hours – though they tend to know the bridging loan broker and have dealt with the borrower previously.