Did you know that bridging finance could be the best solution for your next investment project? We’ve put together this article to let you know what it is and just how it works!
If you’re looking for the best bridging loans and short term bridging loans, PFN Finance has you covered.
Here’s how bridging finance works.
What Are Short Term Bridging Loans?
Bridging finance refers to a loan with a short term. It usually lasts 12-18 months, and typically covers the time difference between property-related transactions. It quite literally “bridges the gap”.
When Do You Need A Bridging Loan?
You can opt for short term bridging loans or bridging finance when you need to complete the purchase of one property before you’ve finalised the sale of another one. Bridging loans are often used as interim facilities to quickly purchase properties, facilitate cash flow, or even fund smaller work while long-term finances are being put into place.
Here are a few scenarios, to help you understand better:
If a property investor wants to grab hold of a good purchase opportunity at an auction. They may want to revamp the property for buy-to-let, so they’ll need to arrange permanent finances. In the meantime, a short term bridging loan is ideally used to complete the sale.
A part-time investor wants to generate short-term business cash flow, as well as get planning permission to turn the property from commercial to residential. They could take out a bridging loan for pre-construction finance till they can get a development loan.
Property developers can use short-term bridging loans to consolidate borrowing in one place till a sale is fully completed. This way, they don’t have to manage many different lines of finance at once, which can get very unwieldy.
Open vs. Closed Short-Term Bridging Loans
Bridging finance is often characterised as either “open” or “closed”.
A closed short-term bridging loan is when there’s a defined exit plan, with an established timeline. An example of this would be when contracts are exchanged, but the completion of either of the transactions is delayed. These types of short-term bridging loans are usually considered the best bridging loans in the eyes of lenders and borrowers, both. This is because it gives both sides a sense of certainty.
Open bridging loans on the other hand, have no fixed timings and oftentimes the repayment source isn’t very clear.
How Do You Repay A Bridging Loan?
You can repay a bridging loan when your property is refinanced or sold.
Who Provides Bridging Finance?
There are lots of lenders that can give you short-term bridging loans. If you want the best bridging loans, you can take one through PFN Finance.
Initially, bridging loans were handled by banks, but they’ve reduced these loans since the financial crisis.
Now, these loans are taken up by specialist property lenders. We have in-house experts that have the resources and skills to ensure proper tailoring of finance according to property project assessment. Our team can deliver the best possible decisions when it comes to loan applications.
How Much Do Bridging Loans Cost?
Short-term bridging loans are prices based on the risk posed to the lender, and the revenue needed for profit-making.
Bridging loans, especially open ones, are considered a little more risky since money is lent for a shorter period of time. The real income from interest itself is generally pretty small, even if the headline rate is high.
This is why you’ll often see interest as well as an arrangement fee. There may even be additional fees like legal fees, security fees, early repayment fees and valuation fees. All these fees have a legitimate purpose so you must understand the costs properly before you sign anything. If you don’t, you could run the risk of decreasing profitability, and even the viability of the project you’re taking on.
Do You Qualify For A Bridging Loan From PFN Finance?
We hope you do! We accept applications from property developers with experience and good credit histories.
Our bridging loans can be lent on lone or leasehold and freehold properties as well.
The loans we have to offer range from £75k to £15m, and the time period is 6-18 months.
Conclusion
Now that you know more about bridging finance, you may be more inclined to carry forward with your latest project using this loan method.
For the best bridging loans, contact us at PFN Finance, and we’ll help you get what you need!
