Top four uses for bridging finance

Sometimes there just isn’t enough capital readily available to you to do what you need, in these types of situations bridging finance could be the right option. Bridging finance is essentially a short term loan that gets to you extremely quickly, giving you the equity you need to do what you want.

Talk to any bridging loan broker and they will give you a list as long as their arm for what bridging loans can be used for. We know you don’t want to listen to all the spiel, so here are the top four most popular uses:

Speedy purchases

If there is a property on the market that’s going fast and you don’t have time to go through the lengthy process of acquiring a commercial mortgage then a bridging loan can be used to make the purchase. This type of financing is very quick, with the money being available to you the next day in some cases, letting you buy that quick-moving property before it disappears.

This can also be used for when you’re being pressured into buying before you’ve managed to sell your old building. In this situation you have funds tied up in your existing property which, if available, would pay for the new building – bridging allows you to make this transaction without forcing you to take the first offer you receive.

Buying land

More often than not, if you’re seeking to gain development finance to build or renovate properties you will be required to own the land before lenders will consider it. Bridging finance allows you to purchase the land, giving you additional security to acquire further financing and buy you more time to obtain a suitable mortgage.

Unlike other financing, bridging can make up 100% of the funding – regardless of the land being bought. Bridging can be used to buy land with or without planning permission or agricultural restrictions.

Bridging to development

Bridging and development finance are completely separate products, aimed at lenders with very different needs. However, a bridging loan broker knows that the two can work very well together and in some cases you may require bridging finance to gain development. Some development properties would not meet the lender’s credentials for funding as they currently stand and requiring some work to be done before they would consider it. Here, bridging finance gives the developers a chance to make essential changes, improvements and preparations needed to put together a development finance proposal that is likely to be accepted.

Renovations

Found a property that suits you to the ground, but upon the valuation you find that it is not mortgageable? This problem isn’t uncommon, especially in fix-me-up buildings or properties which have been empty for a long time. By taking out a bridging loan you can free up the equity needed to make the changes that will allow you to take out a traditional mortgage. This is also a great option if you’re planning on knocking down the building to free up the land it stands on– either to sell on or rebuild.

The best uses for bridging finance: buying at auction

There are many uses for bridging finance, from freeing up capital to helping develop a property before acquiring a mortgage, however the most popular use comes when buying property at auction. Due to the nature of auctions the property needs to be bought very quickly, and often a mortgage takes too long to free up the finance you would need.

Bridging finance brokers are capable of getting you the equity you need as soon as the very next day. This makes them an excellent means of short term finance, perfect for acquiring property at very little notice.

Bridging at auction

Not everybody at a property auction is sitting on huge cash reserves or even has a bank loan lined up. Some people rely on their savings but for many, bridging finance is the solution. You can secure bridging from either an existing property or against the property you wish to purchase. Lenders are therefore happy to provide you with the money as a default on the loan; this will simply mean they own the property.

Not a long term solution

Bridging is designed to be a short, fast solution, getting you the capital you need as quickly as possible with the sum normally being repaid within a year. When acquiring a loan of this nature you need to have a clear cut exit strategy, your bridging finance brokers should be able to arrange for you to move onto a commercial mortgage. An alternative would be if you are waiting for your existing property to sell, which would provide you with the capital to pay of the bridging loan.

Tips for buying with bridging

Although the pace of auctions and acquiring finance is very quick, you need to make sure you’ve taken the time to confirm that the property is what you’re after. Here are some quick tips to avoid disappointment:

•    Don’t buy the property on merits – go and view it!
•    Take bridging finance brokers with you to enable a quicker loan
•    Conduct a property survey to ensure no major work needs to be done
•    Acquire the property’s legal pack from the auctioneers – this will detail any special conditions for purchasing and any extra conditions
•    Decide how much you’re willing pay beforehand and cut off at that figure

With all these factors being considered you will be able to access the capital you need to make a clever, well informed purchase in the fastest possible time. Keeping your bridging finance brokers up to date every step of the way will allow them to make much faster deals, as they have all the information they already need.

Buying with confidence

There’s nothing worse than going all the way through the auctioning process only to find out that you can’t acquire financing from the lender you were planning on using. If you look for the best possible deal using bridging finance brokers then you won’t have to worry about being denied finance. Brokers contact every bridging lender to ensure that you get the best possible deals and the right amount of money for your needs.

The best uses for bridging finance: Buying Land

Bridging loans provide a vital source of short-term funding, allowing you to make quick purchases that you don’t currently have the capital for. Essentially they ‘bridge’ your financial gap until a payment comes through – this could either be a property sale or acquisition of a mortgage.

It can often be complicated to purchase land, especially if it lacks planning permission, but bridging finance brokers make it easy – often getting you the funds you need in just a few days.

How does bridging for buying land work?

When it comes to buying land in desirable locations, you will find that it gets snapped up very quickly. In order to be in for a chance of successfully purchasing a plot you will need to make your finance work as quickly as possible – this is where bridging comes into its element. The ease of attainting a mortgage will depend strongly on the attributes of the acreage you wish to buy – with planning permission granted it would be much easier. However, it may take too much time to iron out all the creases in the deal, in which time another buyer may have stepped in. If you use bridging finance brokers you could have the money you need to make the purchase in a matter of days, with a good broker this could be reduced to 24 hours!

Bridging finance for land developers

One of the main reasons that you would need to use bridging finance is if you are currently waiting on the sale of an existing property that would free up the equity to purchase new land. Developers in particular will want to have a project to move onto once the previous one is complete – it may be that an ideal opportunity comes up before you’ve made the sale. Your bridging finance brokers will be able to get you the funds you need while you wait for your previous project to sell off.

Alternatively, it may be that the land you wish to purchase doesn’t have planner permission, which is needed to acquire a mortgage. If this is the case then a bridging loan will allow you to purchase the area nevertheless, giving you the time you need to gain the proper permissions needed for a long term mortgage.

Tips for buying land

Although the purchase needs to be fast it is important to carry out several essential checks to ensure your money is being wisely spent. Before you buy land always make sure you visit the location, this will allow you to see what the road access is like and whether there are sewerage and power links readily available. Some things you need to consider include:
•    Is the location somewhere that will achieve a higher resale value?
•    Have you had the land surveyed? This will let you know what is available at the location and can also determine the feasibility of your development plans.
•    What is the current planning permission and how likely are you to be granted permission to build?

Once all these have been ticked off, a bridging finance broker will be able to get you the capital required to make the purchase. Always have an exit plan ready, as bridging loans are not designed to be a long term solution and most lenders will require a definite way out.

How to find a trusted bridging finance broker

When you’ve found the perfect commercial investment opportunity, but aren’t able to source the requisite funds for a few more weeks, bridged finance can be a godsend for the fast-moving property investor.

The rates may be higher than with a commercial mortgage, but if bridged finance allows a businessperson to secure a hot property that generates revenues over the next 5, 10 or 20 years then it’s well worth the initial outlay.

But because commercial finance isn’t regulated by a Government body like the FSA controls personal financiers in the UK, securing bridged finance can often be a minefield of unethical lenders. How can you find a bridging finance broker that you can trust?

If they advise you wrong

Perhaps the surest sign of a bridging finance broker that’s in it for the wrong reasons would be visiting one who gave you the wrong advice. For instance, we all know that bridged finance is a means to the solution, not the solution itself. So if your broker encourages you to access this quick lending scheme without a viable exit strategy and a steadfast commercial mortgage, then they’re probably just advising you to get a quick, simple fee without considering your long-term needs.

If they give low timescales

Bridged finance is all about being first to the deal. Therefore, you need a commercial finance expert who knows that time of the essence – dealing with your enquiry quickly while not missing out any of the essential details incurred in such a deal.

Word of mouth

Like so many other industries, when it comes to finding a bridged finance broker that you can really trust, word of mouth doesn’t talk, it shouts. We understand that sometimes finding the best property deal can be a secretive process and you don’t want to shout about your amazing investment idea from the rooftops, but discussing the best brokers is a great way to ensure that the industry remains in good health.

No commercial affiliations

There’s no doubt that each broker will have some lenders that they prefer to work with – after all, their contacts are what make them so attractive – but there are some agents that are tied in with certain providers and will only offer you deals from that lender. So choose an independent bridged finance broker who can present to you a wide range of policies from all sorts of financial parties.

Property development on a budget

You need new premises for your business but you don’t want to spend a lot of money. You’re on a budget and considering that a refurbishment may be cheaper than relocation. What’s more cost effective? Here are a few tips to help you on your way with the perfect property development on a budget.

Budget

Before starting any development, decide on how much money you want to spend. Don’t ‘go with the flow’ but set a budget and stick to it! Include all outgoings and be realistic about what they will cost. Do research into prices if need be and itemise. Remember to give yourself a contingency fund of 10% or 15%, hopefully you won’t need to use it but it provides you with a safety net just in case.

Securing finance

Ensure finance is in place for the whole project before you start any work. If you don’t have the savings yourself there are many alternative ways of funding the development of a commercial property.
Speak to your bridging finance brokers, they may be able to offer you a short-term loan which will cover development costs. Bridging loans can come as an injection of cash in order to upgrade your business premises. This is a loan against the land or a building which you wish to develop.
If that isn’t for you then why not try contacting your local council or city’s commissioning office. They may offer money towards the project in order to develop the area. This may save you money as repayments are made as a special tax over a long period of time. The council may contribute towards the cost of building roadway access to the development or other external factors such as drainage or parking facilities.

Do your research

Make sure that a development is profitable for you. Be aware that it may cost more to develop an older property due to deterioration over time. Unexpected problems may arise which will eat in to your budget. Know what you’re letting yourself in for and get the experts in.
Depending on the extent of the commercial development you may need planning permission. Building regulations may inhibit progress so try contacting your local planning office before you spend any money. Planning permission is not needed for internal alterations.

Spend to save

If you’re going to do a job, do it properly or not at all. You may be doing this development on a budget but it may be better to spend more now to save money later. Don’t scrimp too much on the development as cheap materials are often not as reliable as the medium range ticket items. You may think you’re saving money now but it may cost you double to rectify the problems further along the development. If you’re looking for a quick turnover to sell a development, cheap fittings and fixtures may put off prospective buyers.

Scheduling

Keep a tight schedule. Plan out when you will need each type of tradesmen; for example, an electrician will be needed to run cables before a painter and decorator starts work. Many tradesmen work on an hourly or daily rate so don’t spend money on nothing – find someone with suitable charges for the size of the job.
To save money try and carry out work in a ‘live’ environment. Complete works out of hours or in phased developments. This way you’re making money as you spend it. This is only recommended on small developments, however, to keep health and safety risks low.

Keeping costs low

Other ways of developing on a budget include project managing yourself. This is not for the faint hearted and may seem daunting to an inexperienced individual. Project managing involves co-ordinating and organising all work on site and is very time consuming, but if you have the time available it can save you a lot of money.
If you’re looking at long term savings then energy saving equipment may be apt. Use fluorescent strip lighting or energy efficient lights to create optimum light on a budget. Solar panels will save you money in the long run but if you’re looking to sell in the next few years then they’re not for you.

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Why you might want to opt for bridging finance

In the last few years, as banks and other lenders have become more reluctant to provide loans in the midst of the worldwide credit crunch, bridging finance has emerged as a viable option for many businesses.

Bridging loans are predominantly short-term credit provision over a period of weeks and months rather than years, and ‘bridge’ the gap between arranging a larger, longer-term finance plan. They’re secured against land or property like regular mortgages, but are also known in some circles as a caveat loan or a swing loan.

But why are they becoming so popular? Why might you decide to bridge your finance?

When you need money quick

With so many lenders a little more reluctant to throw money at every request, banks nowadays take a little longer when considering a loan request. Bridging finance allows for a quick solution to any immediate money worries and allows you to access large sums of money, quicker than you’d be able to otherwise.

Keeping bankruptcy at bay

In these financially-straightened times, a business can often find itself living month-to-month with a degree of uncertainty. Many also face the very real threat of bankruptcy without the provision of fresh funds. Here, bridged finance can help a business meet its financial obligations and keep the company going until regular profit returns.

When you’ve got bad credit

Because they’re secured purely against the value of a property or land, the issue of credit doesn’t matter when you’re trying to get bridged finance. So, they’re perfect for the people who may be unable to get credit from other sources.

Paying inheritance tax

Bridging finance is very popular with people who are dealing with the estate of a recently deceased person. When a client is left an expensive property in a person’s will, they may have to pay inheritance tax on the sum. Bridged finance will allow a loan to be taken out against the value of the property in order to pay for the levy – giving more time to deal with the property properly in an often stressful situation. Bridging loans can also be used for paying other tax liabilities.

For management buy outs

If a management is being changed, and a company is buying out another, the process needs to be done relatively quickly. Therefore, bridged finance is a very popular option to provide the necessary capital to complete the move before the more conventional funding can be arranged.

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How bridging finance can help small businesses

If you’re running a small business, you’ll know that raising capital is one of the biggest headaches during the working grind.
With so many prominent lenders being notoriously reluctant to let small businesses borrow money since the economic downturn of the last few years, it’s tough out there for the small companies who need investment in order to progress.

All this is why bridged finance has become very popular with many small businesses. But what is it? And how can it help them?

Bridged finance – that sounds like a bad Paul Simon album. What is it?

All businesses need investment of some kind in order to grow. And bridged finance is a form of finance that’s reasonably quick to secure. They bridge the gap, if you will, between needing investment and waiting for the investment to come in and can be arranged to last as long as it may take for the long-term money with lower rates to arrive. They usually involve money being loaned over a short period of time that’s between 2 months and 2 years and crucially, because the loan is secured using property or land like a mortgage, they’re simple to arrange, even if the person has bad credit.

OK – that sounds good. But how can it help a small business?

Bridged finance can help a small business in a number of ways, the most notable of which includes:

•     When a business needs money fast. As we’ve said, the beauty of bridged loans is that they’re very quick to arrange, so when a small business is in need of a quick financial fix this form of finance is fantastic.

•     When tax needs paying. Sometimes, tax will be demanded by the authorities that you’re not currently able to pay, and a bridged loan will be a perfect way of paying off the bill before more money arrives in.

•     During buyouts. You never know, you may find that the best way for your small business to become a little bigger is by buying out someone else’s. And to do this you’ll probably need outside investment, which can take a while to come through – perhaps outside the window of a buyout. This is another example of when a bridged loan is a super short term option.

Quick, simple finance. You’re speaking my language

Good isn’t it?

Yeah, but there’s got to be a catch

There’s no catch, but you do need to be sure that there will be dependable, high-value finances coming in for the long-term. This will ensure that your business isn’t saddled with high interest rates to go alongside your other costs. As with all finance it’s worth investigating the small print  – and to use a trusted provider with good bridging finance experience and knowledge.

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What is bridging finance?

There are many different avenues to follow when you plan on borrowing money, different types of lending have been set up to accommodate a variety of conditions. The type of lending you need to undertake will depend on the amount of money you require and the length of time over which you plan to make payment. If your business needs access to more money in the intermission before acquiring a substantial payment, then the answer could be bridging finance.

What is bridging finance?

In short, bridging finance provides short term funding, and is usually provided to give you the funding needed to secure property or land. These loans will normally last for a maximum period of 12 months, although some can be as short as 2 weeks, at which point it is expected that you can pay off the entirety of the loan. Unlike other forms of lending, there are no heavy penalties for paying back the loan early – both parties understand that the loan is for a short period, and therefore early payment is an advantage to the lender and borrower.

How does this form of lending work?

The basic principle that drives bridging finance is that lenders give you a sum of money to help you pay for an expense while you wait for a predicted payment to cover the bridge loan. It is important to note that this is not a long term financial solution; it is simply designed to cover the gap between payments. Lenders will generally provide loans for a certain percentage of the property/ equipment price and for a relatively short period of time.

Bridging finance for businesses

There are a huge variety of reasons why your business may require this short-term financial input, however as long as you have money that is expected to come in, in the near future, you can apply for a bridge loan. This money can be used for any of your business needs, from securing land or a mortgage, to paying staff, buying equipment or even launching their initial public offering. Often, this type of finance is used to help you acquire property which needs to be purchased quickly, either in an action or a fast deal; giving you the funding while you wait for a commercial mortgage.

Types of bridging loans

There are two main types of bridging loans available, these are open and closed. The difference between the two is that on an open bridge loan the close date is an unknown factor, whereas closed loans have a set finish date. Generally, the ‘open’ option has higher interest in response to the greater risk it poses to the lender and because there is no prearranged payment set up to provide an exit strategy; the lender will require more details about the business. ‘Closed’ contracts occur when you have a clear-cut exit strategy in the form of a planned payment, minimizing the risk associated with lending you the money.

Finding the right bridging solution for you can be a complicated tasks, there are many potential lenders who offer different loans at various rates of interests. To get the best loan for your business in the fasted possible time you should consult a bridging loan broker.

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