Understanding Bridge Loans
Bridging finance, also referred to as bridge
loans and bridging loans, have nothing at all to do with re-constructing
the London Bridge. Bridging finance is typically a short-term loan that
a business uses to supply cash for a real estate transaction until permanent
financing can be arranged. The word bridge; conveys the fact that the loan
is designed to get you over a temporary obstacle.
A typical use for a bridge loan is to cover
situations such as when a company needs to close on a new office building
before having sold their old one. They would use the proceeds of the bridge
loan to continue making payments on the old building until it is sold.
Bridging finance almost always requires
that you pledge some sort of collateralas security against the loan. You
could offer up commercial or private real estate that you own,or are in
the process of buying, machinery and office equipment or even existing
inventory. If you have outstanding business and personal credit, as well
as an outstanding relationship with your lender, you might be able to secure
your bridge loans on just a signature.
Because the need for bridging finance sometimes
arises suddenly and without warning, it is a good idea to establish a relationship
with a lender before the actual need arises. When you do this you can arrange
to be pre-approved for a specified loan limit. Later, when the need suddenly
arises, you won't have to wade through all of the red tape. The typical
term for a bridge loan runs from a fortnight to as long as two years. Of
course, any terms can be negotiated and a motivated lender will work hard
to match your needs.
Since bridging finance usually lasts for
a relatively short period you may find that the interest rate you are being
asked to pay is slightly higher than a more conventional type of loan.
Lenders make their profit by charging interest across the life of the loan.
The shorter the loan period the less interest they earn. As a result many
lenders will often boost the rate by a 1/2 point or more. In general, the
length of the loan, the amount of risk that is present for the lender,
the quality of your credit history and the liquidity and value of your
collateral all are used to help determine the interest rate.
Your best bet for securing a bridge loan
at the most favourable rates and terms is to work with a qualified UK Commercial
Mortgage Broker who understands the ins and outs of bridge loans. That
way you can get your application in front of as many lenders as possible
and end up with several who are willing to compete for your business.
Commercial Lifeline are Commercial Mortgage
and http://www.commercial-lifeline.co.uk/bridging-finance.asp
Bridging Finance specialists.
You can download our free Commercial Mortgage
guides by visiting our Commercial Mortgage Guide page |
