Do you need to borrow money for the short term? If the answer is yes, then a bridging loan or bridging finance could be the answer for you. It allows quick access to funds for a diverse range of commercial, residential or semi-commercial purposes.
For instance, a bridging loan can benefit those who require a temporary cash injection to purchase a new house before selling their existing one. This particular option can again be utilised by partnerships, individuals and UK limited organisations.
There are many reasons for which individuals consider choosing this option. This detailed guide will talk about some of the most relevant ones. So, without any further ado, let’s dig into the discussion to get a good understanding of this.
1. For Funding The Purchase Of A New Property While Waiting For Your Existing House To Be Sold
It is one of the most common reasons people want to opt for a bridging loan. A lot of the individuals get caught up in house buying chains. They wish to buy a new property but are being held up as the buyer of their present property has not yet completed their purchase.
It can be because they are awaiting the sale of their own house to be finalised. In such an instance, bridging finance can be a valuable option to choose. It is regarded as a short term option that one can effectively utilise for completing the purchase of a new property. If you select this option for similar requirements, you can repay it once funds from existing property sales are available.
2. Purchasing Property At An Auction
Have you recently purchased property at an auction? If yes, congratulations on securing the winning bid on the auction property, but what now? Generally, you can expect to pay a 10 per cent deposit on the day, with the rest of the purchase bid required to be paid after that.
It can cause a big issue as a standard mortgage can take more than 28 days to take effect. But, thankfully, you would be able to eliminate such problems by opting for bridging loans. The best part about this option is that it can be arranged swiftly and so you can use this alternative to complete the purchase. And finally, you can make a repayment once the mortgage is ready.
3. For Developing A Derelict Or Uninhabitable Property
If the property you have bought is in an uninhabitable or derelict state, you would have to go through a tough time obtaining a mortgage for the purchase from the mortgage lenders.
In such a situation, bridging finance comes as a true saviour. You can use this financing option for purchasing the property and providing funds to carry out the required building work. Once you manage to restore the habitable state of the property, you will be able to arrange a mortgage quickly.
4. Short-Term Working Capital
A vast majority of the businesses require short-term working capital. It is often due to a temporary reduction in cash flow because of seasonal fluctuations in their business. If you are also going through a similar situation, you can use bridging loans in such an instance. You can utilise this financing alternative for purchasing equipment and stock.
5. Paying Unforeseen Tax Bills
There are some instances in which a business has to pay unforeseen tax bills that they are unable to pay within the tax deadline. If your business is also dealing with a similar situation, you can opt for a bridging loan to ensure that the tax is paid on time. So, in this way, by relying on this option, you would be able to avoid a late payment fine successfully.
6. Purchasing a Piece of Land Before Planning Permission is Granted
Planning permission is a crucial factor in deciding a long-term loan that one can obtain for building development land. If you, being a developer, are entirely sure that the planning permission will be granted, then one of the best options is to obtain a bridging loan. You can utilise this financing alternative for purchasing a piece of land.
7. Have a Poor Credit Record
Is your credit record poor? If this is the case, you will fail to obtain a standard loan. So, if you require funds, then bridging finance can be an excellent option for you to choose. Some bridging finance lenders will consider a loan application, even if your credit score is poor.
8. Prevention of Repossession
If a particular property is repossessed, bridging finance can be employed to pay off the debt and ultimately prevent the repossession. It again enables an owner to retain control of the property, which helps them sell it on their terms and ultimately prevents a forced sale situation.
9. Settlements of Divorce
Massive amounts of funds are required for settling a divorce case. So, if you are looking forward to settling your divorce case, you can choose bridging loans to meet your fund requirements effectively.
If you have an existing loan that has gone over or its term will end very soon, and you are looking for its replacement, it is strongly recommended to choose re-bridging your loan.
A lot of the bridging finance companies will help you arrange new bridging facilities. You can consider picking this alternative to extend a loan term or access more funds. It is not a good idea to go over the term on bridging finance as it can be expensive.
11. For Navigation Of Long-Term Mortgage Delays
Conventional long-term mortgages can usually take time. Even you will find that a simple mortgage application can take more than a month to process and release the needed funds. It can lead to several risks for their deal to fall through if they fail to arrange the required amount before a specific deadline.
In such a situation, a bridging loan is considered ideal as it can help you cover the period between the purchase of a property and the long-term mortgage completion. Again, after finalising the traditional mortgage, one can utilise it for repayment of the bridge.
12. Buying a New Build
Mostly, the non-UK residents who are looking for a buy-to-let investment give preference to the new-build properties. One of the essential things to note while purchasing a new build is that the developer will focus on setting a deadline date by which the purchase needs to be finished.
If you, as a buyer, fail to complete the purchase by the specified deadline, you risk losing the overall deposit amount. Often, you will see that the time between the property being finished and the purchase completion deadline is significantly less. Sometimes, the time frame is even as little as two weeks.
As a result, it puts a lot of pressure on the buyer, and they find it tough to arrange the finance that quickly. In such a problematic situation, bridging finance can help ease the stress as the buyers can effectively utilise this option to meet that deadline. It means that you do not have to lose your deposit. And thereby, this particular option provides you with peace of mind.
13. Purchasing a Commercial Property
Bridging finance is most commonly employed by investors looking forward to buying a commercial property while expanding their real estate portfolio. Nowadays, investors always consider looking for bridging loans whenever they require swift access to finance.
Bridging loans ensure that the investors do not lose their deposits by the falling through of the sale. Not only that, but this financing alternative also allows the property investors to turn out to be competitive in the market as it lets them quickly grab on to any opportunities.
The points discussed above are some of the primary reasons for choosing the bridging financing option. We hope you have now clearly understood why it is an excellent option for your requirements.
But, one of the crucial things to keep in mind in this aspect is that irrespective of the reason you might require a bridging loan, you would need to arrange security. It can be in the form of property that helps to guarantee the loan. You will find that some of the lenders will generally consider other business assets as security.
Again, to support the loan application you will be required to provide documentation that varies according to the reasons you need the loan. Suppose you require any assistance in obtaining a bridging loan, or you wish to know more about this financing alternative.
In that case, it is a good idea to ask a professional provider like UK Property Finance. They are a leading broker who specialises in all types of bridging loans and property development finance.
At UK Property Finance, they are directly authorised and regulated by the FCA or Financial Conduct Authority, FRN 667602. The company’s expert team possesses a lot of expertise in all sorts of non-regulated and regulated property finance. So, what are you waiting for? Reach out to them today to get the best assistance from their end.
Craig Upton supports UK businesses by increasing sales growth using various revenue streams online. Creating strategic partnerships and keen focus to detail, Craig equips websites with the right tools to increase traffic. Craig is also the CEO of iCONQUER, a UK based SEO Firm and has been working in the digital marketing arena for over a decade. A trusted SEO consultant and trainer, Craig has worked with British brands such as FT.com, DJKit, UK Property Finance, Serimax and also supported UK doctors, solicitors, builders, jewellers, to mention a few, gain more exposure online. Craig has gained a wealth of knowledge within the digital marketing space and is committed to creating new opportunities working with UK companies.