Is Bridging Finance For You?
By definition, Bridging Finance or Bridging Loan is a short-term loan used to purchase commercial property. This is something that can come in very handy, depending on your particular situation.
There are two main points that you need to consider before you opt for a Bridging Finance package, your needs and the state of the property market.
The whole point of Bridging Finance is that it will allow you to close on a property and purchase a new property before you sell your existing one. You will need to evaluate your current situation to determine if your needs justify taking on this type of finance.
Will you lose the new property if you can’t offer a deposit? Would you be eligible for a discount on the purchase price if you can come up with the cash fast?
Existing Market Conditions For Bridging Finance
What are the existing market conditions in regard to the sale of your existing property? Is it going to be possible to sell your existing property in the time frame set out in your finance package? Most Bridging Finance typically runs for one year and will need to be paid in full at the end of the term unless it is possible to convert it into a Commercial Loan.
You will also need to be aware that the interest rates will be higher on a Bridging Finance package.
If the market is slow and you do not have an urgent need for the new property, it may not be in the best interest of your business to take on this type of loan. On the other hand if the property market conditions are good, you can be out from under a Bridging Loan fast. However, it is still something that will need to make sense for your business.
Use A Specialist Commercial Lender
If you feel taking on Bridging Finance is the right thing to do, you will be far better off going through a specialist Commercial Lender.
This will shorten the entire process as a specialist will know the market and they can quickly make a judgment on the best package for you, based on your particular circumstances. Be sure to check that the package can be converted into a conventional Commercial Finance package. You will also want to check on the type of interest rate and the costs you will entail if you do have to convert.
Most Commercial Lenders will be willing to extend the terms of the Bridging Finance package. Let’s say, for example, you have a buyer and you are waiting for the sale to close. Bridging Finance in general is much more flexible and accommodating than you might expect in this respect.
Paying back your Bridging Loan at the end of the loan term more often than not depends on your ability to sell your existing property. If it does not sell in the required time, you will be paying the existing loan on your current property, your new property and the newly converted Bridge Finance as well.
If you believe this may be a possibility be sure to take a package that can be converted to a Commercial Loan if the need arises. Otherwise you may have to come up with the full Loan sum at the end of the term of the loan.