Benefits of Bridging LoansPublished on 16th November 2017 2017-11-16T23:59:26+00:00 - Last update on 17th March 2020 2020-03-17T16:00:49+00:00
As a business owner, growth, expansion and sustainability should always be at the top of your agenda. In order to achieve your goals and make your vision a reality, access to sufficient amounts of funding is a necessity. However, that can sometimes be a challenge, especially at short notice. If you’re looking to move to another premises, raise capital or need assistance in meeting financial obligations, Bridging Finance could help. With a Bridging Loan, your business could gain quick access to a large lump sum, applicable for a wide range of purposes. So by choosing to support your goals and the vision that you have for business with a Bridging Loan, your business could benefit from:
- Larger lump sums
- Choice of products
- Flexible lending criteria
- Range of repayment methods
What can Bridging Finance be used for?
With a Bridging Loan, you could acquire up to 80% of the expenditure, cash flow or project funding you’re looking to subsidise, possibly more depending on the lender and your current situation. Because Bridging Loans work around a percentage there’s no set upper limit to what you can borrow, but funding can start from as little as £10,000. However, some lenders may impose their own limits based on how much they can afford to lend and the amount of risk they’re willing to accept.
One of the aspects that make Bridging Loans such an attractive finance solution is that it can release large amounts of cash to your business which can be used for a wide range of purposes. As well as the buying and selling of property, Bridging Loans can also be used to fund refurbishments, renovations, capital injections, support financial obligations, and so much more. In addition, because Bridging Loans are short-term funding solutions that usually last up to 12 months, they can also be used to bridge the gap between other finance products. So, regardless of whether you operate in retail, catering or in the private accommodation sector, Bridging Loans can prove to be an invaluable resource that gives you the means to achieve your goals.
What products can I apply for?
Another attractive quality of Bridging Finance is that you’re able to choose between a Closed Bridge or an Open Bridge. But to ensure you make the right decision and take into account affordability, current financial situation and goals, you need to understand how they work before applying.
- Closed Bridge: requires you to fully repay the product by a set date. As such, this product is useful if your goal is to make a purchase at auction, acquire property, move to another location or to take over a business, for example where a completion date has to be agreed between you and the current owner.
- Open Bridge: doesn’t require you to fully repay the loan according to a set date. That said, lenders will expect repayment within a 12-month time frame. Therefore, lenders may assign a cut-off period expressing exactly how long they’re willing to wait. Because of the flexibility this offers you as a borrower, this type of funding may be more suited to renovations, refurbishments and other business projects.
How soon can I get a decision?
With Bridging Finance you could receive both a decision and the cash you need within 48 hours of applying, depending on the complexity of the request and your current situation. What enables lenders to offer you the funds you need at such short notice is that Bridging Loans are usually secured against property or land. If you’re able to, you can also secure a Bridging Loan against more than one property. Because these assets typically carry a high resale value it gives lenders greater confidence to lend larger lump sums.
In addition, lenders may ask to review your business’ credit profile and credit score. This enables lenders to gain a stronger understanding of your current financial standing, performance and whether or not you have any outstanding debts. That said, because you’re offering security using property, lenders can adopt a more flexible approach when deciding whether to offer you funding. However, lenders usually have a range of interest rates available, which is assigned using the strength of your credit score. So, the weaker your credit score the more interest you’ll be required to pay, and vice versa.
How are Bridging Loans repaid?
Bridging Loans are short-term solutions which can last up to 12 months. Because this form of business finance can carry high interest rates, treating it as a short-term product is usually more cost-effective for you as the borrower. Providing you have the means, you can also fully repay a Bridging Loan earlier than agreed without incurring a fee, depending on the lender (of course). When discussing how you intend to repay a Bridging Loan you have 3 options available: Pay Monthly, Rolled-Up Interest and Retained Interest.
- Pay Monthly: works by you paying the interest at the end of each month until you’re able to fully repay the principal on the product. The principle is simply the money that you are borrowing, excluding interest. Depending on which product you have chosen, you can either fully repay the product’s principle when you are able to or when an agreed cut-off point has been reached.
- Rolled-Up Interest: totals up the amount of interest you have incurred and paying it back at the same time as the principal, or the money you have borrowed. The means paying back a larger final payment at the end of the agreement.
- Retained Interest: allows you to borrow the interest that’ll be incurred for an agreed number of months on top of the money that you’re requesting to borrow. The interest that has been retained acts as a safety net, helping your business to make monthly interest payment until the principle has been fully settled. If you haven’t used all of the interest that’s been retained some lender may even reimburse what’s left back to your business.
Looking for quick cash for your business?
Ensuring that your business has the funds it needs to seize upon key opportunities isn’t easy, especially at short notice. As a business owner, growth, expansion and sustainability should all be at the forefront of your agenda. However, whether you’re looking to relocate, renovate, resolve cash flow issues or even pay down existing debts, the total cash demand may simply be too much to carry alone. This where Bridging Finance can help. With a Bridging Loan, you could acquire up to 80% of the expenditure or project costs you’re looking to subsidise, usually in as little as 48 hours of applying. So if you’re looking for cash support in order to achieve your goals, or even re-bridging an existing bridging loan, apply for Bridging Finance today, or find out more with Rangewell.
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