Advantages and uses of bridging loans

Bridging loans can typically be arranged in as little as 1 to 2 weeks, although in some circumstances they can be arranged as rapidly as just 1 to 2 days! This makes them a very useful method of finance when funds are required quickly or urgently.

When finance is required for purchasing property at auction, bridging finance is often the popular option. When a bid becomes the winning bid at a property auction, the auction house will require a deposit on the day, normally 10 per cent, and the rest of the money normally needs to be in place within 28 days to complete the purchase.

Due to the speed with which they can be set up bridging loans are often arranged in order to pay urgent debts such as tax demands and other final demands.

Businesses often use bridging loans for a variety of purposes. Commercial bridging finance is often used to buy a bargain when funds are required quickly in order to secure a sale. Once the sale has been completed the bridging loan would usually be repaid through refinancing or from the proceeds following the subsequent sale of the bargain. Commercial bridging finance is also used by businesses to fulfil orders. An example of this would be after receiving a large order materials may need to be purchased in order to fulfil this order. In addition wages may need to be paid for labour in order to manufacture the order. Once the order has been completed and delivered, payment will normally be made either immediately or more likely in 28 days. Following payment the commercial bridging finance facility can be repaid.

A very common use for bridging finance is to facilitate buying and selling properties when the same completion date for buying and selling can not be arranged. Bridging loans can provide the funds required to facilitate the purchase of a property before the funds are available from the sale of another property. Later, once the property has been sold the bridging loan can be repaid.

During the economic decline over the last few years, and the subsequent tightening of lending criteria throughout the many financial institutions, bridging loans have been used for a variety of uses. This is because many customers looking for finance have been forced to turn to bridging finance as an alternative. This is because the usual finance facilities have been unable to provide the required finance due to stricter lending criteria. Bridging finance providers often offer more flexible lending criteria with regards to credit history, employment history and the type and condition of any property offered as security.