bridging-loan1Bridging Loans are a type of gap and interim financing arrangement that allow borrowers access to short term loans in order to meet short term liquidity needs.

It works by providing users upfront funds for immediate use while a permanent financing is still on its way. This is common in property acquisitions and real estate transactions but can likewise be used for other purposes deemed fit.

Just like other methods of finance, bridging loans come packed with benefits and advantages but these perks can only be maximized and utilized with proper use. To achieve that, we have come up with the following list and guideline to show everyone along. Let’s begin.

Be in the know. It is crucial to first understand how bridging loans work, what they do, the costs they bring as well as the responsibilities that must be dealt with. Failure to completely understand and grasp it will make one prone to committing mistakes.

When in doubt, research and ask. Not all financing providers are the same. Terms can vary and so it is advised that asking questions be done when something feels amiss or confusing. Bridge loan providers won’t hesitate to help in this matter unless they’re not of quality.

Say no to autographs. Before any contracts or paper are signed they must be scrutinized and understood first. It would be silly simply sign and assume that the contents have already been fully discussed. It’s always best to verify than risk the consequences.

Use it as should be. A common mistake taken against it is in matter of usage. It must never be utilized to replace a long term financing medium as it is not designed to be one. It is only to be used for the short term. No ifs, no buts, period.

Plan your exit. Although used for the interim, it is still a form of credit and must therefore be repaid on time. There are two ways to close it out. The first can be done at maturity date upon the arrival of permanent funds. Second, it may be done prior to maturity if it proves to be feasible.

Allocate everything. Bridging loans are not restrictive in nature so users can utilize and spend them however they want. Because of this, proper budget and allocation must be done to ensure that every need has been provided for and that waste is kept at bay at all times.

commercial-bridging-finance3When it comes to interim financing for commercial properties, businesses and investors seek for commercial bridging finance. This method allows users to derive immediate short term loans that connect the gap between the initial expense requirements on an asset acquisition and the permanent source of finance thus earning it the reputation of a stop gap measure.

Before one decides to take on a commercial bridge loan, there are several questions to be asked. After all, dealing with financing is something that must be done cautiously and not randomly. Below is a list of them.

Question #1: What do I know about Commercial Bridging Finance?

It is important to fully understand and comprehend how a bridge loan works. One cannot fully enjoy its benefits without first understanding how it must be utilized at best. Perform research and/or ask someone who is skilled and knowledgeable enough to explain things.

Question #2: Who do we tap to get one?

There are many commercial bridging finance providers out there. A few punches on the keyboard and the screen will flood with a long list of options. The challenge is to determine who the best is. Look for reviews. Ask for recommendations. Check the official website and social media handles. Call and talk to your prospects.

Question #3: How much cash would we borrow?

This depends on the company’s needs and will therefore vary. Careful examination, analysis and calculation must be done to make sure that the amount loaned doesn’t fall short or way over the top.

Question #4: What expenses will we use it for?

Because a bridge is borrowed for purposes of initial investment expenses, common examples of its uses would be for professional fees, taxes, survey expenses, finder’s fees, legal costs, security deposit and down payment among others. The great thing about a commercial bridging finance though is that its use is non-restrictive. In other words, users may allocate and spend them freely and as they deem fit.

Question #5: What’s our exit plan?

Because commercial bridging finance is first and foremost an interim fund, it will have to be closed out by the permanent fund line. What makes it even better is the fact that most providers allow for liberty in payment where borrowers can opt to pay for it before maturity date, as early as one obtains enough cash, or at maturity date, upon arrival of the permanent source of finance. One’s job now is to choose which method would suit best and if such choice would be feasible given the circumstances.

bridging loansBridging loans are short term loans used to connect the gap between a debt coming due and a pending permanent financing medium. It is because of this function that they fall under the category of interim financing and stop gap measures.

The use of a bridge comes with many benefits but such perks are not fully enjoyed if one fails to use them properly. To better rake up its advantages, here are some quick tips when using bridging loans.

Get to know all about them. Do you really know what it is, when it’s supposed to be used and how it works? Well you should. That’s a definite must. Research can bring you a lot of knowledge but it wouldn’t hurt to seek some advice and clarification from bridge providers too.

Know your purpose. There are many uses for it and there too are those that do not fall under its category. This means that you have to establish the purpose by which you are taking it out otherwise you might simply be wasting time and resources.

Define your needs. Analyze if your needs really do call for a bridge. Are there other options? If so, have you weighed down the pros and cons of each? You have to compare and carefully examine each alternative. A bridge loan may be beneficial but is it the most beneficial for the occasion?

Canvass for providers. Not all bridging loan providers offer the same quality. Some even present mediocre services so it is up to you to scrutinize. Do your homework. Research about a particular company first and read reviews and feedback about them.

Understand the terms of the contract. Apart from quality, providers also differ in another aspect and that is in the contents and inclusions of their services. This makes it a must for borrowers to ask where necessary. Read and clarify every detail first before you say yes to a certain bridge provider.

Prepare a well defined exit plan. Obviously, this should be done beforehand not during or worse after you get a bridging loan. That’s no plan anymore if you don’t do it ahead. Keep in mind that the very purpose of this type of financing is to provide for immediate needs when your main line fails to arrive on time. You have to close out bridging loans and you need to know at the beginning how you will do it. Are you going to close it before maturity or at maturity date upon availability of your permanent finance?

Property bridging finance is a great way for investors to make their real estate acquisitions possible. This short term financing has helped a great deal not only for investors who are looking at a profit but also for individuals and families in search of a home as well as establishments in search of adequate space for their corporate endeavors and operations.

But before we go on, allow us to establish first when bridging finance is used and what it cannot be utilized for. This short term and interim financing method is meant to be used as a stop gap measure. It’s very purpose is to ‘bridge’ the gap between two major transactions, the first being the purchase of the property from the seller and the second being your permanent and long term fund line which has not been made available at the time of need.

bridging loansWe all know that real estate assets are big ticket items. Investing in one either for personal, business or profit purposes is no joke and will require a significant sum. Most people, establishments and investors fund these transactions through one of or a combination of the following:

  • For individuals and families: personal savings, salary, proceeds from sale of old home, other income and credit (e.g. loan and mortgages)
  • For establishments: income and profits, retained earnings, capital equity, proceeds from sale of other properties, other income and credit (e.g. loan and mortgages)
  • For investors: personal savings, income from investment portfolio, proceeds from sale of properties and credit (e.g. loan and mortgages)

If you notice there are quite a number of common denominators in the lists above namely, income, proceeds from a sale and credit. There is completely nothing wrong with these three but if you take a look more closely, these fund sources need a lot of time.

You need to work and wait for income to flow. Proceeds from a sale will require having to look for a buyer and awaiting collection of their payment. Credit sources like bank loans and mortgages, as we all know, have a pretty tedious and long application to approval process. What if you’ve already found the asset you want to purchase? What if you need to make a down payment now to secure the sale? What if there are loads of other buyers competing their way to the asset you like? And what if your permanent fund source is not yet available as of the time of need? This folks is where property bridging finance comes into the picture. Just reach out to

bridging-LoansNewly established businesses have yet a lot to prove. There are a lot of tasks to work on and certainly many obstacles to pass through. Speaking of obstacles, one of the biggest and most daunting tasks that newbie entrepreneurs would have to face are property acquisitions. They are daunting in such a way that they are big ticket items with significant values. Unlike others, they’re not one that you can return and exchange. They will require certain documentary and legal chores too and not to mention ample amount of funding. Speaking of funds, bridging loans are considered a best bud not only by small businesses but also by established ones and so you might want to befriend them.

Now, why would you want bridging loans? Why not opt for other financing and credit methods?

  • It connects the gap between your need and your permanent financing. – Bridging loans were designed to provide for short term needs where permanent financing is not yet available or is yet to be available at a certain date. Such is the case when you need to acquire a store space today and the apartment unit you are selling whose proceeds will be used for the purchase has not garnered a buyer yet.
  • It eliminates opportunity risks. – Bridge loans basically allows you to act fast to secure your acquisitions when the opportunity arises without losing out to another buyer. By having your short term needs provided, you can make the transaction happen without fear that you will lose the time frame given for you to come up with the needed funds.
  • It is fast in terms of application and release of cash. – The procedures taken and paperwork needed to have your bridge loans approved is less of a hassle. This is because lesser is required and asked for by the financial providers as opposed to that of a mortgage or bank loan. Moreover, the release of cash after an approval is pretty fast as well.
  • It doesn’t put a heavy weight on your credit worth. – Although, this does not go to say that providers will skip checking your credit standing. The thing is unlike traditional loans and mortgages, providers put less emphasis on it which makes it a great option for newly established businesses that do not have that much on their financials yet. This is because bridging loans simply provide gap financing and are not for the long term.

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commercial bridging loansCommercial bridging finance pertains to a short term funding option used to “bridge” the break or gap between a financial need coming due and the main line of funds yet to be available. In this scenario, the case pertains to an acquisition of commercial property.

As a stop gap measure, commercial bridging finance is very useful in making way for an asset purchase which would otherwise be impossible without its presence. It is of general knowledge that these purchases are rather significantly valued and will take quite an amount to pull through. Buyers will often result to a line of credit or a combination of sources however these may not become available at the moment of need and so the “bridge” steps in to provide for the short term needs while you await your chosen funding method to be available.

To best benefit from such a stop gap measure, experts from suggest that you do the following:

Expert Tip # 1: First off, understand how it works. – There is much more to commercial bridging finance than the definition and brief description mentioned above. You cannot take advantage of its benefits if you are not fully aware of how it works and what it does. Read, research and ask.

Expert Tip # 2: Know your needs. – How much do you need? When do you need it? What specific property will it be for? Be sure that you are fully aware of your needs and necessities so that you do not over-borrow or under-loan.

Expert Tip # 3: Find the best providers. – Not all financial providers are the same. They may say that they offer similar services but in reality, they do not. They each offer varying terms, rules, agreement clauses and rates. Their level of quality may not be at par as well. This makes it important for you to get to know the possible providers first before you make the deal. Read reviews and ask for client feedback. Talk to them and determine their level of expertise and knowledge about their products.

Expert Tip # 4: Have your schedules on check. – Repayment options for commercial bridging finance are pretty flexible. You can pay it using your main fund line the moment it arrives or even earlier when you find the means to do so. It is best to have your exit route planned out at the onset to best benefit from the service.

bridge loanBridging loans is a kind of short term funding, interim financing and stop gap measure that helps the completion of an acquisition such as a property in cases where the purchasers fund line or source has come short in terms of time and value. It is taken out pending the approval of a long term financing method with a larger value. Once the permanent means of financing has been approved, it will then be used to take out the bridge.

As its name suggests, it helps bridge or connect the sale and the main fund source in order to close the transaction. This happens since many big ticket sales will require what we call a down payment. This is a certain percentage of the total selling price which must be provided to the seller at the point of sale with the remaining balance payable in installments over a period of time.

Since the acquisition of a property will require quite a huge sum of money, a combination of fund sources can be used by the buyer which includes but are not limited to future and present income, savings, investment profits, sale of other assets and even credit like loans and mortgages. In the event that these fund sources could not be available at the time of need or although available are short of the required amount, bridging loans may then be taken to take its place in the mean time. As mentioned earlier, it will then be closed as soon as the permanent financing mode has been made available.

Of course the use of such type of interim financing will ultimately depend on the buyer’s decision. There are consequences to not using it when you should have and the worst of that would have something to do with opportunity losses.

Such losses can be suffered immensely for a business related endeavor, for example. Location is a huge factor when getting an asset for one’s business. Losing a great deal and a prime asset can be detrimental as it equates to lost opportunity which can come with material costs as well. Most properties will also cost less today than they will tomorrow. On the point of view of a residential property, not using bridge loans when all signs point that you should can make you lose that dream home you have been eyeing upon.

bridge-loansBridging loans are a form of interim financing that helps buyers meet their needs in times when their permanent source of funds do not come in time or for some reason are delayed. Such is the reason why they have been named as such. They help bridge the purchase and the fund source and are therefore a stop gap measure. Despite being present and popularly used for a long time now, there are still a number of misconceptions revolving around bridge loans and we are here to bust a few of them in order to set your facts straight. Read on further and get to know what these are.

1st Misconception: Bridge loans are more expensive.

First of all it is wrong to compare a bridging from a regular loan because the two are nowhere the same. First of all the former is not to be considered expensive. Although they come at a slightly higher interest rate, such is only equivalent to the risks involve don the part of the provider. Remember that they are designed to work on a short term basis and when used properly they will not be pricey.

2nd Misconception: They are only used for property acquisitions.

They can be used for pretty much any other purpose where needed. They are not solely created for asset purchases. The fact however remains that this is the most popular sue for them.

3rd Misconception: Your credit history does not matter and will not be checked.

Just like any other forms of credit, you will be asked to provide the requirements upon application and before approval. The financial providers will still look into your credit history. The only difference is, this may not be as tedious as that required when applying for traditional bank loans and mortgages.

4th Misconception: They are considered a second debt.

In essence they may look like one but they are more of a loan anticipating loan. Although they provide for the needed cash when the one you have has been stuck or is deemed unavailable at the moment. They are then to be closed or paid out by your permanent funding once they arrived so they will not have the effects of a second debt.

5th Misconception: Paying for them is tedious.

As mentioned in the previous item, it is quite easy and flexible to close out your bridging loans. You can opt to wait out until your permanent funding comes out or you can pay it earlier should you acquire enough resources to do so.

Commercial bridging finance is one effective option used by several entities in order to aid and support their asset acquisitions in the event that their main line of fund has not been made available in time. Also referred to as bridge loans, these provide buyers an option to take hold of their acquisitions before someone else eyeing the same property does.

Essentially what happens in a commercial bridging finance is that the buyer seeks to fund an acquisition by pooling resources over time through savings, restricted cash or retained earnings, by getting a loan or by selling of a redundant, useless but functional asset. However, there are situations when these sources have not been completed yet and are therefore not available at the moment. This is where the bridge loan steps in. In most cases they provide for the upfront costs or the down payment and depending on the arrangement to the first few installments. When the main line of fund is already available such is then used to repay the bridge loan as well as the remaining balance on the property.

business financingIt is used for many of its benefits with two of which as its most sought after advantage as follows:

TIME SAVINGS – Since we are talking about commercial properties these are to be used for an entity’s operations therefore a bridge loan enables time savings and aids in operation timeliness and continuity.

COST SAVINGS – Because real estate asset prices fluctuate and often rise up as the days progress, acquiring one at an earlier point can enable cost savings.

Despite the benefits that it boasts about commercial bridging finance has to be used the right way otherwise one would not be able to enjoy such advantages. Below is a brief list of major mistakes when using them.

  1. They are short term loans so use them as is. Do not treat them as your long term funding scheme like a regular loan or they will end up being more expensive than you expected.
  2. Another mistake is your inability to plan for your exit route. How do you plan to pay for it? Will you use your loan or save up from your income? Planning is necessary as well as proper resource allocation.
  3. Lastly, a common blunder when it comes to commercial bridging finance is transacting with the wrong firm or financing agent. You need to scrutinize your bridge provider well.