Bridging loans – not just for buying property

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The majority of bridging loans are for purchasing property, but there are many other reasons for taking one out.

According to a Shropshire Star article from August 2016, Shropshire Wildlife Trust plans to convert a former scrapyard at Whixall near Whitchurch into a nature reserve. The trust needs £500,000 to buy the land and remove about 100,000 used tyres and other waste so that the site can be restored to a nature reserve. To secure the purchase of the scrapyard and the surrounding land, the Trust took out a bridging loan that will be paid back from public donations.

On an even larger scale, a bridging loan of €7bn was recently arranged between members of the European Union and Greece. Greece will pay the loan back after three months.

At the end of 2015, an even bigger bridging loan of €20bn was arranged for Volkswagen to tackle its shortfalls. Volkswagen’s financial troubles were caused by the revelation that the company had falsified its diesel emission tests, which led to a collapse in its stock market value.

Businesses and organisations can use bridging loans for a number of purposes that are not property related. Like Volkswagen, firms can use loans to provide working capital to cover temporary cash flow issues. Stock or equipment purchases can be financed through loans, while some businesses use bridging finance for partner buyouts.

Bridging finance lenders developed because of the need for short-term property finance, but the market has diversified to provide commercial bridging loans for many purposes.

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