Seven Reasons to Choose Bridging Finance

Seven Reasons to Choose Bridging Finance

Are you looking for a short-term solution to bridge a finance gap? If so, here are seven reasons why a bridging loan could be the best option.

1. To buy a property while waiting for another to sell

A short-term loan will enable you to continue with a purchase while you wait for the funds from another property sale. Being caught up in a property sale chain or a delay in the sale of a current property can mean you don’t have the available finance to complete on a new one.

A bridging loan temporarily steps into the funding gap, ensuring that your purchase and or sale can continue. Once the property sale has been completed, you can repay the bridging loan from the funds released.

2. You need short-term capital

If they experience a temporary drop in their cash flow, many businesses have the option of using a commercial bridging loan to release some short-term capital. You could also use commercial bridging loan to buy stock or essential equipment purchases. 

3. If you plan to buy a property at auction

When buying at an auction, using a bridging loan can be a quicker way to obtain the funds you need, as a standard loan can take over 28 days to be approved. Utilising an auction bridging loan with a same-day decision means you can complete on a property then repay the loan once your long-term mortgage is in place.

4. Buying land before being granted planning permission

Planning permission is often expected to be in place before a long-term loan for a site development can be approved. But if you are confident that permission will be granted, you may be able to use bridging loan finance to purchase the land. Once planning permission is in place, you can then use the funds from the mortgage to repay the bridging loan.

5. You receive an unexpected tax bill

If your business receives an unexpected tax demand and cannot release the funds to pay it on time, you can avoid any late payment charges by opting to take out a short-term loan. Bridging finance can be used to clear the outstanding amount by the tax deadline, giving you the time to repay the amount to your loan provider.

6. You have been refused credit

A poor credit rating can mean you won’t be approved for a standard loan. So, if you need some extra capital, a bridging loan provider may consider releasing short-term funds. However, they will expect to have the bridging finance secured, on either a property or commercial assets, so that they have a guarantee that they will get repaid.

7. Developing a property that’s currently unlivable 

Our final reason to choose bridging finance is if you are looking to buy a property that is currently uninhabitable or is in a dilapidated state. Most mortgage providers won’t lend for an unlivable property, so using a bridging loan can ensure you get the construction and renovation work done. Once completed and the property is usable, you can put a standard mortgage in place and clear your short-term bridging loan.

Whatever the reason you have for applying for bridging finance, always get the right advice from an experienced bridging loan specialist before making your final decision.