How to Apply for Bridging Loans

Bridge Finance Provides a Quick Short Term Solution for Cash Needs

Sep 4, 2009 Fleur Hupston

Bridging loans are used to solve temporary cash problems. An individual or business takes out a bridging loan until permanent financing can be obtained.

Besides funding commercial and residential loans, bridging finance can be used to fund holidays, weddings, unexpected payments, extending a property or buying a business.

Bridging Loans- Commercial

Bridge loans are used commercially to carry a company so that it does not run out of cash between financings or to carry distressed companies while searching for a take-over investor.

Commercial bridging loans can also be used for expansion of a business, land acquisition, refinance, short term funding and property development.

A bridging loan is also an ideal tool for self employed clients looking to purchase new premises or raise funds to inject into their business, but do not fit with the traditional lenders criteria. Traditional commercial lenders' criteria and application processes tend to be lengthy and time consuming.

Bridging Loans- Residential

A residential bridging loan is generally used to cover shortfalls between buying one property and selling another, for example if an individual has purchased a property at an auction and needs to complete the payment within a certain time, or if a home has been purchased before the old one has been sold.

In a property market where homes sell quickly, bridging finance is rarely needed. But in a slack market, more home owners are forced to consider a bridging finance loan.

Where and How to Get a Residential Bridging Loan

A regular bank may offer a bridging loan or there are specialist bridging lenders who can come up with the money in a very short period of time. An online search is a good place to start looking for specialist lenders. Lenders typically want to take the current property and the new one as security, so if there is an issue with repayments, both properties may be at risk.

How To Go About Getting a Bridging Loan

After applying, have the property that will be secured against the loan valued quickly. The lender typically conducts this valuation (paid for by the borrower) and then the process will begin. While the valuation is underway,conveyancing needs to be carried out quickly. If all runs smoothly, the entire process should take 7 to 10 days from the time of application to the time the loan is paid over.

Bridging Loans – What are the Costs Involved

Bridging loans are expensive because of the extra risks to the lender. They should only be considered as an option if repayment can be made relatively quickly or else the borrower may find him or herself in a position where two mortgage loans have to be repaid.

Bridging loans are usually set at a fixed interest rate. If there is enough time, shop around for the lender offering the best interest rates. Those who have a poor credit history will pay more for the loan.

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