Some bridging finance uses
Bridging loans are a short term method of borrowing money that are useful because they can be taken put in place quickly and can also often the cheapest way to borrow money over a short term period. A bridging loan is however only meant as a short term method of borrowing, they are not suitable as a long term finance solution as there are cheaper options on longer term finance. Although the interest rates for bridging loans are higher than other options, a bridging loan can often be the cheapest option for short term finance when set up costs and early repayment costs are also taken into consideration.
Another characteristic of some bridging loan facilities, that can be very useful, is that their lending criteria is flexible so that a poor credit history and past arrears may not prevent obtaining a bridging loan. Also very flexible on many facilities is the type of property that is being offered as security for the bridging loan. For example property that is in a poor condition, derelict property and even property that is of an unusual construction may all be suitable for providing security for bridging loans. The bridging loan provider is interested in what the security is currently worth and not so bothered about its condition or construction.
Two of the most common uses for bridging loans are firstly to bridge a financial gap when buying a property and wanting to complete on its purchase before an existing property is sold, or the sale of it has completed. The second common use is to purchase property at auction because they are quick to arrange and if turning the property around for a quick profit bridging loans are an ideal method of raising short term finance.
There are many other uses for bridging loans and scenarios where they are particularly useful.
Bridging finance is useful for purchasing run down property, poor condition property that is in need of restoration. There are bridging loan providers who are happy to accept this type of property as security and provide the finance to help fund the purchase and restoration work. Once the work has been completed the property is usually either sold or refinanced in order to repay the bridging loan.
Other popular uses for bridging finance are to fund the restoration or conversion of old barns and other building already owned, and to raise finance quickly to pay urgent bills and other important debts. Businesses may use commercial bridging loans to provide cash injections when cash flow is temporarily slow and to provide funds in order to fulfil large orders.