What is a Bridging Loan?
Bridging Loans are a form of short-term funding to help you bridge the gap when buying or bidding for property and selling another one – but it can also be used for any business purposes.
Why choose a Bridging Loan?
When looking to buy property, you will be required to raise finances quickly, which is not always an easy feat. A Bridging Loan lets you borrow the funds you need quickly so you need never miss a great opportunity for your business.
However, Bridging Loans are not solely to bridge the gap between the purchase and subsequent sale of a property or when an opportunity too good to miss presents itself. Many of our clients use them to:
- Make a first-time property investment at an auction
- Refurbish owned properties to increase the yield
- Obtain a short-term cash injection for other business purposes
Who is a Bridging Loan right for?
A Bridging Loan is right for any business wanting to invest in land, commercial property, Buy to Let, property refurbishment or any other business need, regardless of the size of your company and the sector you operate in. The one thing all businesses with a Bridging Loan have in common is they have a planned exit route to show their lender how they will be able to repay their loan.
How do the repayments work?
Repayments of a Bridging Loan depend on the type of interest you have chosen. If you’re not sure which one is right for your business, our team of expert will be able to assess your requirements and tailor the right funding for you.
You repay the interest each month and it is not added to the balance of your loan. At the end of the agreed term, you simply repay the loan amount.
Rolled up interest
The entirety of the interest is repayable at the end of your agreed term alongside your loan. This means you don’t need to make any monthly repayments, but the interest is added to the balance of your loan.
The lender lets you borrow the interest alongside the original loan. This will cover your monthly repayments for an agreed period and you then repay the entirety at the end of your term.
What fees are associated with a Bridging Loan?
Due to the nature of the borrowing, there are more fees associated with a Bridging Loan than with other funding options. The fees may include:
- Exit fee: if you’re able to repay your loan early, you may need to pay a small exit fee to do so.
- Legal fees: to cover the costs of solicitors and legal fees the lender will incur when setting up the loan
- Set up fee: To cover the costs of setting up the arrangement