A Bridging Loan is a short-term type of loan used to ‘bridge a gap’. These loans are often used to secure finance quickly. The main reasons people choose a Bridging Loan are: buying a property from an auction, refinancing or purchasing of a property in need of refurbishment, wanting to buy a property quickly which is being sold below the market price, or releasing funds quickly to pay unexpected bills or needs (Tax, VAT or cash flow issues). Of course, there are many other reasons that a person may need to raise finance quickly and due to the simple and quick nature of certain lenders’ application processes, a Bridging Loan can be an appealing option for borrowers.
Anyone who is buying a large property or developing a large property asset can use this funding facility.
As the name suggests, these Bridging Loans are large in size and are secured against property. They are used to secure funds quickly to purchase, or release funds from a property.
The bridging market is in the UK is as varied as the property sector itself. Most lenders who offer loans to the home buyer’s market have an upper limit of around £4-5 million.
Anyone thinking to develop a large project then the lending has to come from a specialist lender who has the capacity to deal with Large Bridging Loans between £5-10million. As the loan amount increases so does the risk. While all lenders hope to avoid loan defaults and only the large lenders can cope with this kind of scenario.
There are only a handful lenders who would not even get involve until the loan amount is close to 25 million. These specialist lenders can arrange loans in billions.
There are a number of benefits of Large Bridging Loans. Such as they can be really useful when you are developing large projects. Interest rate is usually low due to the size of the borrowing. There is a good chance to get top up finance due to vast funds availability.
Because of the size of the loans, it is very important that you have a well-planned bridging loan exit strategy. An exit strategy is the plan you have in place to repay your bridging loan when the time comes to pay it back.
This is a very vital factor when it comes to obtaining a Large Bridging Loan, without a proper exit strategy any lender would be cautious to lend. It is therefore paramount to have a solid exit plan to pay your loan back on time.