There are many reasons why you may need a short-term loan to bridge a gap in your finances or property transactions. Here’s why bridging finance might be right for you.
Purchasing a property
Not all property purchases go as smoothly as you would like, and you could find yourself in a position where the buyer of your current property gets stuck in a chain, or you are still waiting for your own sale to complete.
In such situations, a bridging loan can be used as a form of short-term borrowing to enable you to buy your new property and avoid the sale falling through. You will then be able to repay the bridging finance once you receive the funds from the sale of your existing property.
Buying at a property auction
When buying a property at auction, you often need the finance quicker than you can get from a standard loan, which may take more than a month to complete. Using auction finance means you will be able to complete your auction purchase. You can then repay the bridging loan once your standard loan for the property is in place.
Paying an unexpected tax bill
On occasion, a business may face an unexpected tax bill, which could attract late payment charges if settled overdue. The business may choose to use a bridging loan to avoid these additional payments and settle the tax bill by its due deadline.
Buying land before planning permission is granted
If you intend to develop a site and need a long-term loan for the purchase, you may find that the mortgage requires planning permission to be in place before the loan can be approved. In this case, you may consider a short-term loan to bridge the gap in your finances if you are confident that planning permission will be granted so your land purchase can still go ahead.
When you need short-term capital
If a business or enterprise experiences a temporary drop in their cash flow due to the seasonal nature of their work, a bridging loan can bring in extra working capital. A business could also use a bridging loan to finance new stock or make essential equipment purchases.
Developing an uninhabitable property
Many mortgage lenders will not offer a mortgage on a property that is currently dilapidated or uninhabitable. But if you intend to develop the property, you could consider bridging finance to pay for the necessary construction work. Once the property is in a usable or liveable condition, you can then put a standard mortgage in place, which can also pay off the bridging loan.
If you have been refused credit elsewhere
A poor credit history can prevent a prospective borrower from qualifying for a standard loan. However, they may find that a bridging loan provider would consider a loan application. Although a form of security will be needed, such as a property or commercial assets to guarantee the loan.
Whatever the reason you may be considering bridging finance, it is advised that contact a bridging loan expert. Specialists such as Finbri can guide you through the application process as well as the costs involved so you can be sure a bridging loan is the right funding solution for you.