Bridging finance solutions have become increasingly popular in the UK, as they offer a quick and flexible way to secure short-term funding. These solutions are particularly useful for property developers, who may need to secure funding in order to purchase a property before it is sold or refurbished, or for individuals who need to raise capital in order to purchase a property before they sell their existing one.
Types of Bridging Finance Solutions
There are two main types of bridging finance solutions: closed bridging loans and open bridging loans. Closed bridging loans are generally used for properties that have been purchased with the intention of renovating or developing them. They have a set repayment date, and the borrower is required to provide a clear exit strategy, such as the sale of the property or the refinancing of the loan. Open bridging loans, on the other hand, are used for properties that have been purchased with the intention of living in them or renting them out. They have no set repayment date and the borrower is not required to provide a clear exit strategy.
How Bridging Finance Solutions Work
Bridging finance solutions work by providing a short-term loan that is secured against a property. The loan is typically repaid within 12 months, although it can be extended for up to 24 months. The amount of the loan is determined by the value of the property and the borrower’s creditworthiness.
Advantages of Bridging Finance Solutions
- Quick approval: Bridging finance solutions are typically approved within a few days, making them a fast way to secure funding for property purchases.
- Flexibility: They can be used for a variety of purposes, including buying a property before selling an existing one, refurbishing a property, or raising capital for a new business venture.
- No income verification: Many bridging finance solutions do not require borrowers to provide income verification, making them accessible to a wide range of individuals and businesses.
Disadvantages of Bridging Finance Solutions
- Higher interest rates: Bridging finance solutions typically come with higher interest rates than traditional loans.
- Short-term repayment: The short-term nature of the loan means that borrowers need to have a clear exit strategy in place in order to repay the loan.
- Risk of repossession: If the loan is not repaid on time, the property may be repossessed.
Bridging finance solutions can be a great way to secure short-term funding for property purchases, but it is important to be aware of the risks and to have a clear exit strategy in place. It is always advisable to consult with financial advisors before taking on any such loans.
How IMS can help you with your bridging loan needs
We generally provide bridge loans to landlords, property developers, and asset-rich borrowers for investment, buy-to-let, and development. However, if the banks are taking too long to review larger home loan applications and you risk losing your purchase due to delays in processing them, we can assist with private individuals’ bridging loans.
To find out more information about obtaining a Bridging or Short-term loan, contact a member of our team today.
