Historically, bridging loans were created for people wanting to complete the purchase of property quickly. While many bridging loans are still used for this, there are now many more of reasons for using a bridging loan.
One of the advantages of a bridging loan is how quickly it can be arranged. A conventional loan or mortgage can take several weeks from the initial application until the money is available for use. A bridging loan application can be approved in a matter of hours and completed in less than 48 hours. This makes bridging loans particularly useful for business that want to raise money to complete a deal that has a tight deadline.
Bargains can still be found by shrewd investors at property auctions. Most auctioneers require a deposit to secure a winning bid and then will expect a fast completion of the purchase. A bridging loan can pay for the deposit and also be used for completion until more long-term finance is obtained.
The cheapest properties at auctions are often ones that are derelict or need extensive refurbishment. Many lenders will not give a mortgage for these properties. Investors often use bridging loans to provide the funds for refurbishment work and then either sell the property for a profit, or obtain more long-term finance.
Landlords increasing their portfolio
Not all landlords are cash rich, with most of their money tied up in property. In order to expand their portfolio quickly, they can use their existing property as security for a bridging loan to pay for the deposit on new property purchases.
Fixing a broken chain
Often when purchasing a home, the purchase is dependent on a long chain of property transactions. If a portion of this chain breaks, then a bridging loan can be used to quickly complete the property purchases.
Many business experience cash flow issues, but this is especially true for businesses that have seasonal products. For example, ice cream sellers sell more in the summer, and calendar publishers have a restricted selling periods. During times of low cash flow, expenses still have to be covered and staff paid. A bridging loan can help a business manage periods of low income until business improves.
Purchasing stock or equipment
In order for a business to expand, it may require more equipment or need to purchase extra stock. Bridging finance is available for this.
How to get a bridging loan
Bridging loans are available for individuals, businesses and organisations. The main criteria for successfully applying for a bridging loan is to have a clear exit strategy. This means that you know both when the loan can be repaid and how the funds will be available to repay the loan. Some lenders will require additional security for the loan such as property.
At Ascot Mortgages, we can arrange bridging finance, specialising in matching lenders to a borrower’s individual requirements. Whatever the reason for needing a bridging loan, contact us today to discuss your borrowing requirements.