Bridging finance has been largely used by many home and residential buyers and even landlords and property for lease investors but does it benefit businesses too? Yes it most certainly does and quite similarly in fact. Read on and get to know the said perks.

But first, what is it? Bridging finance is a type of short term loan that provides real estate buyers with a fund to be used as down payment in the event that their main source of fund is not yet available. This is the case such as when an old property that has been put up on sale has not been bought yet and the proceeds would have been used to pay for the purchase. Another is when a bank loan is still being processed. Basically, it fills in the gap between the initial payment and the main fund line. Now let us proceed with its benefits for companies and businesses from alternativebridging.co.uk.

It allows for faster acquisitions. No more waiting time is going to be stretched. You can get hold of the property now and use it now. Business is all about efficiency and that entails time.

bridging financeIt supports continuous operations. Assets are used by businesses for their operations. They may choose to use it as a branch, an office, a warehouse or any other means they need to in line with their operations. Because bridging finance makes the acquisition faster, it supports continuous operations and cuts down any halts or delays.

It cuts opportunity losses. Down payments are vital when it comes to closing the deal with a real estate broker or seller. Should the initial buyers be unable to provide for such within a given period of time, the next party in line would be considered. Assets in the real property market are hot commodity especially if they are within a prime location. This is what business owners want because a prime location means better market reach and therefore better product and service exposure and access to customers. These properties have many buyers eyeing them and if one is not fast enough, you could lose a really good asset.

It enables flexible payments. Companies may opt for any means of repayment that they find comfortable and beneficial. They may choose to pay out the bridging finance loan using pooled funds as they become available or use part of the proceeds of the sale of their recently sold property or the loan that has lately been approved. Plus, because it’s short term it will only go on for a definite and squat period of time.

 

Property bridging finance is nothing new but many people still feel foreign about it. Worry not as we are here to clarify those tangled ideas. When it comes to property acquisitions it is important to know what your options are and get to know each one in depth. In this case, we’ll talk about the bridge loan.

Property bridging finance has been used as a gap filler or a bridge to connect the main or permanent source of cash to the required down payment by the sellers or brokers in order to close the sale. This is done in cases when the loan or mortgage applied for is yet to be completed or the proceeds of the sale of an old asset have not been realized yet.

In most cases, the use of such bridge loan happens in this manner:

  1. property bridging financeLoan Application or Sale – Initially a buyer would apply for a property loan or mortgage to a bank or any other financial institution. The process involved from application to approval can take some time and are not readily available. If a mortgage is not involved, an old property may be put up for sale or lease.
  2. Potential Property for Purchase – A property that interests the buyer has been made available for sale or has been made known while the credit applications is still ongoing and while the proceeds of the sale or lease has not been realized.
  3. The Down Payment – In order to close the deed of sale, a down payment or initial asking price has to be paid first with the balance payable in installments or in full depending on the written agreement between buyer and seller.
  4. Use of a Bridge Loan – To provide for the said down payment, a bridge loan is acquired to fill in the cash gap.
  5. Sale and Use of Property – The initial payment closes the deal, papers are signed and the property can now be used by the buyer as he wishes may it be for residential, commercial or industrial purposes.
  6. Availability of Permanent Fund Source – The permanent source of funds then becomes available and complete.
  7. Repayment of the Bridge – The repayment of the property bridging finance can be done in many ways. One is when the borrowers have gathered enough resources to provide for it. This can be before or once the loan has matured. Another is by using the part of the proceeds of a loan, mortgage or property sale and whatever else is remaining to pay for any balance left.

 

Businesses use commercial properties or assets for different reasons. Oftentimes these are used as office space, a branch or a store location. Nonetheless, such acquisitions are a sign of expansion, growth and better market reach. Many people assume that with the profits of businesses, they can simply acquire such assets with the outright use of cash which is obviously wrong. Many companies, small and established alike restrict cash and retained earnings for various purposes and they too resort to debts in the form of payables and other corporate liabilities which are to be paid out as inflows from sales come in. The said loans are often in the form of bank loans, commercial mortgages which are long term and commercial bridging finance which is short term.

commercial bridging financeMany people are already familiar with the first two loans so let us get to known bridging finance and how it helps businesses with their commercial asset acquisitions.

First let us define commercial bridging finance. Basically they are bridge loans but rather than used for home and residential real estate properties they are more directed at corporate assets that are to be used for operations. The only difference is the type and purpose for the asset. That’s as simple as it gets.

Their name has been coined as such they are used to bridge, fill and connect the gap between a commercial asset’s initial down payment and its permanent source of funds like a loan or mortgage. This is why they have been described as a loan anticipating loan and are also called a caveat loan.

It also gives out the same benefits. For example, take a restaurant chain who is eyeing a specific property at downtown metropolis. It has some funds restricted for an acquisition but such would not suffice and so a loan has been set up however the property was put on sale even before the credit source has been made available. A good commercial property is a hot commodity and if one is not quick enough to act, someone else will close the deal. It saves up time and cuts down lost chances.

Additionally because they are short term, they can be easily repaid using the permanent source of funds as soon as they have been made available. Commercial bridging finance therefore aids in quick acquisitions and therefore supports the continuous flow of operations.