These are loans for a short period of time, normally secured against property or land and used when speed is essential and the finance is needed quickly. It is not the cheapest way of borrowing money but is normally used when time is the most important factor.
The advantages of bridging loans include:
- Can be done within a matter of days.
- Requirements normally consist of a valuation and an exit.
- Loans can be non-status – no requirement for income details and accounts.
- Most lenders will base their loan on the Open Market Value of the property, irrespective of the purchase price, so in some cases a 100% finance is possible.
- Often used for Auction purchases, change breaking when a purchase has become delayed.
- Used for property refurbishment when a normal mortgage cannot be obtained.
- Businesses use bridging finance for a quick purchase of stock for manufacture against an order.
- To avoid potential repossession or to remove a receiver/administrator once appointed before moving to a conventional lender.
- To provide cash flow.
Since the credit crunch, bridging has been used for many different reasons, but on the whole, it is for the purchase of property both commercial and residential and for the developments of such properties.
Lenders require a valuation, an application form and identification to start things off, then the deal can go straight to lawyers and can be completed very quickly. Rates start from 0.65% per month up to circa 1.5%, depending upon the security.
1st Business Finance are seeing more and more requests for this type of finance and have therefore developed close relationships with all the lenders in this market meaning that we can place deals very quickly and guide you through the whole process.