While UK bridging loans are growing in popularity amongst the business community, they are still the source of some confusion and this article will help explain how they can benefit you and your business.
One reason for the popularity is that bridging finance can be an excellent financial product for a range of needs and situations.
In addition, high street banks and lenders have tightened their lending criteria which makes it more difficult to access loans and this application process can take several weeks or months to complete.
The big attraction for bridging finance is that an application can be processed in just a few days and, depending on the security being used for the loan, you could receive thousands of pounds and up to several millions of pounds depending on the lender.
For those who need a major cash injection at short notice then bridging finance could be the answer.
Some bridging loan lenders will finance the loans themselves but they are growing in popularity with peer-to-peer lending platforms which offers investors excellent returns by offering money to those wanting a loan at good rates of interest.
Information for anyone interested in peer-to-peer lending
The experts at the Bridge Crowd can offer more information for anyone interested in peer-to-peer lending and wanting to enjoy excellent returns of up to 12% per annum.
So, what is a bridging loan? Traditionally, this short-term financial product has been used by many people to help buy a property while they await a cash injection, for example when selling their current home.
The money is offered as a short-term secured loan that will help the borrower effectively bridge the gap between needing finance to buy new property and receiving money to pay for it from the sale of their current property.
Bridging loans are also very popular with landlords and property investors who can quickly organise finance when buying a property at auction, for example.
Business owners can also access funds quickly when they have a cash flow issue or if they simply want to buy stock for a promotion or refurbish their premises.
Business to take out a bridging loan
The circumstances for someone or a business to take out a bridging loan will depend on their own individual needs and what they need the money for.
Bridging loan providers will provide the money for a range of purposes including the refurbishing of a property that may not attract a mortgage until it has a kitchen or bathroom installed help make it a habitable property.
It also needs to be appreciated that there are risks attached to bridging finance and borrowers need to be aware of these and particularly need to have an exit strategy in place.
This strategy will tell the lender when a borrower can repay their bridging loan.
The terms to appreciate here are ‘open’ or ‘closed’ loan. If you know when you can repay the funds, then you will have a closed bridging loan, whereas if you do not know then this will be known as an open loan.
It’s also important to appreciate that you will need to repay the bridging finance when the loan falls due regardless of whether it is an open or closed loan.
Bridging loan interest rates UK for this flexible finance
The bridging loan interest rates UK for this flexible finance also need to be appreciated and they do vary between lenders and on the amount being borrowed and the length of time the money is needed for.
In addition, for those who opt for a closed bridging loan, then they will generally enjoy better rates of interest than those wanting an open loan since the lender knows when they will be repaid.
The best way for anyone or a business owner to appreciate the benefits and potential costs of a bridging loan is to use a bridging loan calculator which most lenders have on their website.
This calculator will tell applicants how much a loan will cost and how much interest they will pay which is charged on a fixed rate basis.
There will also be other costs involved as well as such as administration fees and a surveyor’s fee to evaluate the asset being used as security. There may also be legal fees incurred by the lender that need to be paid.
Other fees that need to be considered for this form of alternative finance may include the cost for indemnity and valuation insurance and there may an introducer’s arrangement fee as well.
If you would like to know more about UK bridging loans and how they can be used for your business, or for a personal purpose, then contact the experts at The Bridge Crowd who can help.