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 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.