Myths About Commercial Bridging Finance Debunked

commercial-bridging-finance-ukCommercial Bridging Finance is an interim funding method used to provide immediate cash for the initial and upfront costs to a commercial acquisition. Although its use is pretty widespread, it still isn’t as popular as traditional modes of borrowing like mortgages and bank loans which is why a good number of people and organizations still find it confusing thus leading them to fall prey to certain myths.

Today we are going to debunk such myths so everyone gets to have crystal clear understanding about commercial bridging finance and what it can really do.

MYTH: It only works for real estate properties.

DEBUNKED: Although it is more commonly used in terms of property acquisitions, it is still feasible for other commercial and business needs such as inventory purchases or machinery acquisitions.

MYTH: It’s another line of debt.

DEBUNKED: Technically, the bridge is still a loan but it wouldn’t exactly have the same burdens. First of all, it is short term in nature so interest does not spread out as much. Second, the payment for it is to be closed by permanent financing as soon as it becomes accessible, in other words, the latter closes the former making it feel more like an advance rather than a borrowing.

MYTH: It is not available for everyone.

DEBUNKED: Just like any other type of financing, each provider will have their own set of requirements and qualifications but this does not go to say that commercial bridging finance is exclusive to a select few. It can be employed by investors, individuals and organizations regardless of their intended purpose for it.

MYTH: It is very hefty and expensive.

DEBUNKED: The interest rate is slightly higher than that of a long term loan but this is only for the fact that providers bear a bigger risk in such an arrangement. Even so, it is not expensive or hefty as the bridge is for a short term period only and will thus cover a few months to two years at most.

MYTH: It can be used as the main fund line.

DEBUNKED: Commercial bridging finance is an interim funding medium and a stop gap measure. This means to say that it shall cover for the time lag between a debt or need coming due and one’s main fund line. Therefore, it only acts as a connector or a bridge and not a replacement of the latter.


How Repayments of Property Bridging Finance Work

Bridging-finance-ukProperty Bridging Finance is one of the world’s leading short term loan and interim financing options today. It allows businesses to derive immediate cash to help fund their property acquisition needs while waiting for permanent financing to be made accessible.

It is celebrated for its various perks such as the following:

  • Immediacy – It’s fairly faster and less troublesome to apply for and get an approval with bridging loans. This makes them the perfect option for property acquisition and its various initial cash requirements.
  • Short Term – The shorter span of time that it covers makes it less of a burden. Because it spreads itself within a few months to two years at most, it becomes fairly easier to handle compared to others.
  • Opportunity – The main use of this financing medium is geared towards grabbing opportunities. In the real estate market, buyers need to act fast or risk losing the chance to the next investor in line. Failure to provide for things like security deposits and down payments can seriously mess up an investment undertaking.
  • Savings – Many assets, especially prime ones, appreciate in value over time. In other cases, they get bought and resold over and over again with each transaction increasing in asking price as each seller aims for a profit. The longer it takes for one to buy them, the more expensive they can become. The use of the bridge eliminates this risk thus the cost savings.
  • Stop Gap –Property Bridging Finance connects a current need and future funds, thus eliminating the gap between these two points. This is particularly useful and beneficial in business as it aids in the continuity of operations and prevents hiccups and delays from occurring and creating losses.

But apart from the ones listed above, Property Bridging Finance is celebrated for the flexibility of its repayment options. What does this mean? The method, unlike others, allows borrowers to close it out even before it matures or becomes due. Remember that methods like bank loans, mortgages and the like are to be strictly paid upon maturity. In other words, users can close out the bride loan before maturity date and as early as they are able to. At the same time, it can also be done upon maturity, when the permanent funding comes through. This flexibility makes it all the more east to use and less burdensome.

How Commercial Bridging Finance Sustain Operations

commercial loansIn business, space is a crucial element to operations. After all, you cannot hold office, manufacture products or fill up your store shelves in thin air. You need something tangible, one that’s concrete, durable and effective to say the least. However, we all know that purchasing a property isn’t going down an easy-peesy route. In fact, moving and relocating or even opening up a new shop can put a hamper on your operational momentum because it takes time. Luckily, we have something called commercial bridging finance!

What is it exactly? Commercial bridging finance is a type of gap financing arrangement that acts as a stop gap measure wherein the borrower can get access to short term loans to meet its short term liquidity needs. It is names as such because it helps bridge the debt coming due and one’s permanent source of funding.

Still confused? Come up with a list of funding sources that you can use to finance your commercial property acquisition. For sure you’ll have items in the likes of bank loans, mortgages, proceeds from a sale, income and savings to name a few. However, if you take a careful look at all of these you will come to realize that they all take time. All this ‘waiting game’ is what can hurt your operations because it further delays your use of the property and therefore its benefits.

With the aforementioned sources, you need to wait before the resources are pooled or that money is finally released. This can be a problem because getting any real estate investment will come with initial costs which you have to provide for. Examples of these expenses include research costs, surveyor fees, security deposits, down payment, finder’s fee and taxes to name a few. Plus, spotting a great deal is no easy feat. You’ll have to battle it out with the other buyers in the line too. Failure to come up with the money for these needs can hinder an acquisition. This hurts operations again as it further delays the purchase and use of the asset.

All of these risks are negated by commercial bridging finance as it provides for all such short term needs. What makes it even better is that it can be easily closed out before or at maturity once your permanent financing has finally come through. Because it aids in the successful acquisition, it is able to help sustain operations and prevent any delays and hiccups. In business, time is of the essence. It’s pretty much golden.

Learn more about bridging finance here

How Repayments of Property Bridging Loans Work

property-bridging-loanRepayments of property bridging finance are one of the many reasons that add up to its charm. This interim financing method is already beneficial in a myriad of ways and helps buyers, both individuals and organizations, to make better, effective and timely real estate asset acquisitions.

Property bridging loan is first and foremost a stop gap measure allowing the connection between an obligation coming due and a yet to be available permanent source of funds. It works to provide for short-term funds in times of short-term liquidity needs. This can happen a lot in many asset purchases because most individuals and organization use funds that need the accumulation of time.

Take for example bank loans and mortgages. We all know that although they provide for your needs, it can take a significantly long period of time to cover for its application and approval often requiring you to wait from weeks to months. The proceeds from a sale of an old property, salary and income will need some waiting too.

Because of all this “waiting game”, buyers are put to a certain disadvantage especially when they’ve already found the asset they wish to acquire. Remember that to close a contract and take hold of the right to buy the asset, one must first be able to provide for a security deposit and a down payment. Let’s not forget about all the other expenditures necessary to find the property.

When permanent financing is not yet available, buyers can make use of property bridging finance to avoid risking any opportunity losses. It can also be seen as a cost cut for those who will have to sell the asset they are currently using to acquire the new one since they won’t have to rent as they move out and wait for a buyer.

Now as far as payment goes, property bridging loan has a huge advantage because it allows for flexibility and liberty.

Providers like, allow the repayments of property bridging finance to happen on or before the maturity date. Borrowers may opt to close and pay it out early on as they are capable of doing so and as they deem fit. At the same time, they may also opt to wait for the maturity date which is the time where the permanent source of finance comes through. Because of this flexibility, this interim financing method does not add to the burden of obligations but rather aid buyers in their endeavors.

What a Family Benefits from Alternative Property Finance

property loansMany families and home buyers make use of what we call bridging loans or alternative property finance in the purchase of their desired residential properties and investments. It is one of those forms of credit that people are likely to tell you about when you wish to get a house, an apartment or a condo unit. But then again, many are still confused as to what they can actually do, what their very purpose is and how they can help. Allow us to answer those queries for you.

First of all, a bridging loan pertains to a sum of money lent by a financial institution to cover an interval between two transactions. This is why it has been referred to as a stop gap measure and an interim financing method. It provides for the home buyer’s short term and immediate needs (e.g. down payment, initial installments, agent costs, etc.) at that certain point in time where permanent funding sources have not yet been made available, as is the case with waiting for a bank loan and mortgage to be approved or waiting for an old house to be sold.

Families can therefore benefit from alternative property finance in the following areas.

    • First of all and as mentioned earlier, they are short term in nature and would therefore not be a stressful burden for families seeking out a home. The bridge shall only be used at a specific point in time, often mere months, and does not double up as a second form of debt. Additionally, they are easily closed and repaid. Home buyers may pay it out even before maturity should they be able to do so or upon the arrival of their permanent source of funds.

  • Second, they help families cut back on costs. Most if not all properties tend to cost more tomorrow than today. This is oftentimes due to the continued appraisal of lands and the development of communities, establishments and infrastructures that give way to appreciation in value. In other words, buying a home today costs less than doing so in the future.
  • Third, there are many buyers out there so you have to keep competition in mind. A really great home will not stay in the market for long. Someone can snatch it up if you fail to get it on time. Bridging loans help prevent that.
  • Lastly, bridging loans help families save on their rent. Many families who sell their old houses to use its proceeds to fund for their new one will often have to move out and rent a place while awaiting a buyer. This contributes to more expenses. By using the bridge to close the deal on the property, families can skip the rental and immediately move in while waiting for the old property to be sold.

Learn more on alternative property finance at this site