Bridging finance also referred
to as "bridge loans"
and "bridging loans",
is a short-term loan that a
business or individual 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.
What
is a Bridging Loan?
Bridging finance almost always
requires that you pledge some
sort of collateral 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.
How
they work
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.
Properties
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.
Bridging
Loan contents
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Bridging
Loan contents
Where
to get a bridging loan
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