What Is A Bridging Finance Loan And How It’s Useful

When your finances are low, a loan is a viable way to get by. Though many people shy away from loans, using them for short-term purposes can be quite beneficial.

Depending on your circumstances, a bridging loan might be the financing option you need to get your project underway or wrapped up. If you’re not familiar with a bridging loan, this article will tell you everything you need to know and how it can help you.

What’s A Bridging Loan?

Also known as a bridge loan or bridging finance, a bridging loan is a short-term loan that’s mainly used to secure instant cash flow until a permanent source is obtained. At some point in time, most homeowners, landlords, or business owners would have come across this term. Homeowners who are growing out of their current house and are seeking a new one would typically use bridging finance to acquire a new home before they sell their current one.

Business owners can typically use a bridge loan to help with payroll, getting inventory, and maintenance. This works for existing businesses as well as new business ventures. A bridge loan goes up to one year and is known to have higher interest rates. Let’s look at some more use cases.

Renovating or Restoring Property

Sometimes, your property may need some work to keep it in tip-top shape and you need additional funds to see it through. This could be difficult for you if lenders deem your property unsuitable for differing reasons. When you’re unable to secure refurbishment finance, bridging finance may be a good option to consider. These lenders aren’t as skeptical and since most renovations are short-term, it would be a good fit.

Purchase or Develop Land

If you come across a promising piece of land that you envision you could put to good use, a bridge loan can help you get it. By utilizing land finance, which comes under bridging finance, you can get loans to purchase land or raise capital for land development. Due to the speed with which you can get this loan, you’ll be in a position to immediately make a purchase if you need to.

Preventing Repossession

No one likes to lose something they own, and a bridging loan can help you keep what’s yours. If you have a property that is under threat of being repossessed, you can use the bridge loan to pay off the associated debt. This saves you the headache, and potential heartache, of losing your property and trying to replace it.

Bridging loans are very versatile in what they can do for you. There are many more ways it can help you achieve your goals. Since it’s a quick method of securing fresh cash flow, you’ll be able to snatch up new opportunities that come your way. Since this financing option comes with higher interest rates, plan for the costs that taking this loan may incur. Besides the rates, there may be additional fees that you would need the officer or institution to break down for you so that there are no surprises.