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This
a short sample article relating to Bridging Finance.
You can download the full guide to Bridging Finance, Commercial Mortgages
or Buy to Let Mortgages by visiting our Commercial
Mortgage Guide page.
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Understanding
Bridging Finance
© Copyright 2005 Commercial
Lifeline
Bridging Finance, also referred to as "bridge loans" and "bridging
loans", have nothing at all to do with re-constructing
the London Bridge. Bridging Finance is typically a short-term
loan that a business uses to supply cash for a real estate
transaction until permanent financing can be arranged. The
word "bridge" conveys the fact that the loan
is designed to get you over a temporary obstacle.
A typical use for a bridge loan is to cover situations
such as when a company needs to close on a new office building
before having sold their old one. They would use the proceeds
of the bridge loan to continue making payments on the old building
until it is sold.
Bridging Finance almost always
requires that you pledge some sort of collateral as security
against the loan. You could offer up commercial or private
real estate that you own,or are in the process of buying, machinery
and office equipment or even existing inventory. If you have
outstanding business and personal credit, as well as an outstanding
relationship with your lender, you might be able to secure
your bridge loans on just a signature.
Because the need for bridging finance sometimes arises suddenly
and without warning, it is a good idea to establish a relationship
with a lender before the actual need arises. When you do this
you can arrange to be pre-approved for a specified loan limit.
Later, when the need suddenly arises, you won't have to wade
through all of the red tape. The typical term for a bridge
loan runs from a fortnight to as long as two years. Of course,
any terms can be negotiated and a motivated lender will work
hard to match your needs.
Since bridging finance usually lasts for a relatively short
period you may find that the interest rate you are being asked
to pay is slightly higher than a more conventional type of
loan. Lenders make their profit by charging interest across
the life of the loan. The shorter the loan period the less
interest they earn. As a result many lenders will often boost
the rate by a 1/2 point or more. In general, the length of
the loan, the amount of risk that is present for the lender,
the quality of your credit history and the liquidity and value
of your collateral all are used to help determine the interest
rate.
Your best bet for securing a bridge loan at the most favourable
rates and terms is to work with a qualified UK Commercial Mortgage
Broker who understands the ins and outs of bridge loans. That
way you can get your application in front of as many lenders
as possible and end up with several who are willing to compete
for your business.
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Commercial Lifeline are Commercial
Mortgage and Bridging
Finance specialists.
You can download our free guides to Commercial
Mortgages, Bridging Finance
or Buy to Let Mortgages by visiting our Commercial
Mortgage Guide page.
This article comes with reprint rights. Feel free to reprint and distribute as
you like.
All that we ask is that you do not make any changes, that this resource text
is
include, and that the links above are intact.
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