Whats a Bridging Loan

What is a bridging loan?

If we think of loans, a mortgage or a student loan that has been paid out over several years may come to mind. Bridging loans differ from what they are for a short period of time - to cover the period between the purchase of one asset (e.g. a house) and the sale of another to finance the purchase.

How is a bridging loan different from conventional financing?

Perhaps you need short-term financing to help you buy real estate, in which case have you ever thought about a bridging loan? Rob Drury, Advice Specialist, will explain what this type of loan is and how it can help your company move into new facilities. How much is a bridging loan?

All of us are conscious of the types of credit that you could typically take out either as an individuals or as a company, borrowing a certain amount for a certain amount of timeframe and repaying that loan in installments over the term of the loan until the amount lent plus a certain amount of interest is repaid.

Bridging loans are not too different in their business because they are short-term loans, which will help you if you continue with a sale before you are able to obtain more solid, long-term financing. Providing you with a "bridge" from one financing option to another.

What would be the different situations in which you would use a bridging loan? Bridging credits are usually of two types: open and locked. Open-ended credits have a higher degree of inflexibility as there is no specific date of redemption for the loan (although it will most likely be less than twelve month from the date of borrowing).

Closed mortgages have firm payment details and are therefore used when the sales of your real estate are known and you only need to go from one known date to another. As small businessmen are becoming more and more disappointed with conventional banking credit, our financial analyst describes four ways in which start-up financing will be available to businessmen in 2018.

Is bridging credit more costly than conventional credit? Talking briefly is yes, by perhaps higher interest rates or by management charges, as the lender looks to make their profit within a shorter timeframe to a conventional borrower. When something is derailing this sales, then you must have an alternate way to repay the loan that does not include the proceeds from the sales that are no longer taking place.

Their bridging credit providers would most likely want to see proof of this scheme to make sure they get their cash back. Have a look back at Rob's current Business Advice articles: Subscribe to our Business Advice email to receive the latest information from Business Advice.

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