For many individuals and businesses, their knowledge of business finance is somewhat limited. Some common question they may ask before applying for a loan are listed andanswered below:
1. What is an approval in principle?
Most lenders will give a lending decision within one to two hours. This is known as an approval in principle (AIP). The final approval is subject to the application documents being correct and a valuation report on the property used to secure the loan.
2. Can 100% of the purchase price be borrowed?
If the bridging loan is for a property purchase, normally up to 75% of the value of the property will be lent by a bridging lender. If the borrower has additional property, this can be used as more security. In this case, a lender may be prepared to lend more than 75%.
3. What are the affordability conditions?
Unlike a mortgage, a bridging lender is not overly concerned about your income or the state of your accounts if you are applying for a business bridging loan. Provided that you can provide evidence of how you will be able to afford the interest payments, and how you will repay the loan, pay slips or accounts may not be necessary.
This means that if you are unemployed but have assets that can repay the loan and interest, you could be eligible for a loan. Also, if you have a poor credit record, this will not necessarily prevent you from receiving a loan.
4. What types of property can be used as security?
Most lenders will accept any property for the loan security as long as its value covers the loan. It does not matter what condition the property is in if it has the required value. Commercial and residential property is accepted. Land can also be used, and non-property assets will be considered such as valuable art, jewellery or business assets.
If the property is mortgaged and there is enough equity in it to cover the loan, it can be used as security.
5. What happens if I find that the bridging loan is not enough?
There are occasions when, after the funds from a bridging loan are available, the borrower finds that they need more. For example, the loan could be to refurbish property. Issues can occur during the building work that means more money is needed to complete the job. If there is still sufficient equity in the building used as security for the original bridging loan, lenders will be open to the discussion of providing additional funds.
6. What happens if the loan is not repaid before the end of the term?
Bridging finance offers short-term loans usually for one year or less. Sometimes, it can take longer than expected for the repayment funds to be available. In this case, provided you inform the lender as soon as you are aware of the situation, they may be able to work with you to extend the loan period.
If you have more questions or want to arrange a bridging loan, contact Ascot Mortgages for expert help and advice.