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What are Bridge loans and why are they important for businesses?

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A bridging loan is a short term finance solution generally used by property developers or business owners until they can secure a more permanent financial solution, such as a mortgage or bank loan. By using a bridge loan business owners can release capital held in existing property or assets and use this to overcome any financial difficulties and generates instant cash flow. 

The term of a bridge loan can vary, however the duration normally ranges from 6 months to 12 months. The interest rates of a bridge loan is normally a bit higher when compared to a normal loans, however this higher rate of interest can soon be negated when taking into account the advantages a bridge loan can bring.

For example, by using a bridge loan for a quick buy-to-sell you can flip a property in a short term without having to worry about the early settlement penalties of a mortgage or bank loan.

Bridge loans for Property Purchases:

Most property developers will make use of bridge loans when buying and selling houses. For example, let’s assume James finds a new property he would like to purchase, but he is stuck in a chain selling his current property. By using a bridge loan the new house can be completed on immediately, allowing him to begin any redecoration or building works. Then once he sells the existing property, he can clear the bridge loan.

Bridge loans for Commercial Purchases:

Historically bridge loans would have been usually been restricted to property purchase, however, more recently businesses have been turning to bridge loans for any business requirements. Today, many business will now use bridge loans as a solution for a wide range of business opportunities, such as;

  1. Funding a deficit on overrunning project to help complete them.
  2. Kick starting new projects.
  3. Supplier invoice payments.
  4. Settling large tax bills.

Difference between Bridge loans and Traditional Loans?

Many businesses will opt for a bridge loans due to their flexibility, instant finance and short loan terms, something which a regular mortgage will not be able to offer. As long as the business holds enough capital in the property or asset they are borrowing against, funding is generally available and can be release quickly and easily. Also, by using a bridge loan as opposed to a mortgage, the business is not being tied down to a lengthy repayment period, where early settlements are heavily penalized.

Generally however, a property owner will make use of bridging finance until a longer term bank loan or mortgage can be sourced, as the approval of the bridge loan is simple and fast, and avoids the checks and due diligence of mortgages and bank loans. Many banks have put these additional check in place since the recent economic crisis and are reluctant to lend their money to anyone, which has led to approval times on loans and mortgages increasing dramatically.

The interest rates on bridging finance are generally higher when compared to traditional bank loans or mortgages, however when consider the time they save, and the fact you are not tied into a lengthy repayment period like that of a mortgage, this interest can soon be negated. Also you can be eligible for a bridge loan, even if you have a poor credit score or adverse credit history.

So, if you are looking for bridging loan in the UK, then choose Bridge Direct as your first choice, their team has over 30 years’ experience in bridge loans and the financial sector, they accept 1st and 2nd charges and perform no credit checks.

Bridge Direct has hundreds of satisfied customers across the UK, and when you call bridge direct you will speak directly with the decision maker, as they are direct lenders and not brokers. No middle men are involved, this is why bridge direct will guarantee an instant decision on all bridge loan applications. 


Tags: Bridge loan lender, Bridge Loans UK, Bridging Finance, Short Term Gap Finance

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