Bridging Loan Alternatives

Delivering rapid access to credit that can help your business solve immediate issues or make an important, time-sensitive purchase, bridging loans can be a great choice for lots of organisations.

They are, however, a more expensive option thanks to their short-term nature, carrying greater interest rates and higher complexities than other types of loan. 

Bridging loans are flexible, but they are also usually repaid at the end of the loan agreement, with interest accrued added to your balance. This can be an intimidating prospect for some businesses and cause issues that may force you to consider alternatives. 

If you need funds for your business in a hurry but bridging options don’t work for you, it might be better to explore other options. Here at Rangewell, we act as independent finance experts for your business – work with us, and we’ll discuss your current situation, your goals for the future and then help you secure a bridging loan alternative that works for you.

Why might you consider a bridging loan alternative?

The pros of bridging finance

The main advantage and use-case for a bridging loan is to ‘bridge’ gaps in your finances. Typically, this is to deliver a credit injection ahead of a crucial purchase, such as a development purchased in a property auction. You then only have to repay the loan at the end of the agreement.

In an ideal scenario, this isn’t an issue as you would assume to have grown and planned enough to make the repayment. Examples of businesses that do this successfully include property developers who purchase properties at auction with bridging finance, then redevelop them and sell them for profit to repay their debts. 

If you’re unsure whether you’ll be able to make the repayment at the end of the term, it’s probably best to avoid choosing a bridging option. 

The cons of bridging finance

Bridging loans are useful options for many applications, but they’re also limiting in scope and carry disadvantages compared to more general business finance options. Here are the main negatives to take into account:

• Terms are short, which means lots of pressure falls on the borrower to ensure they can repay the full loan within a short space of time. 
• Bridge loans are usually offered with high fees and charges added to the costs. 
• Bridging loans are secured, so you’ll need to offer sufficient levels of collateral to satisfy the lender before you can get finance. 
• Lenders often only offer bridging finance when properties are involved, demanding a fairly high loan-to-value.

What to look for in an alternative to a bridging loan

Bridging loans serve a specific purpose: offering short-term loans that boost cash flow and help you bridge gaps to drive growth. If you can forecast your business expenditure and avoid requiring a short-term loan, you can reap greater benefits from more flexible business financing. 

Other types of loans can be spread across far wider timeframes, which will lessen the interest rate and usually cut down on fees or charges. In addition, you’ll usually be expected to make monthly repayments rather than at the end of the term, which will help you better manage cash flow. 

Even if you DO need short-term cash injections, you may not need a bridging loan. Our team at Rangewell are experts in the lender’s market, and we can also help you arrange a rapid loan that helps your business in the short term but carries more flexible terms and repayment expectations than a bridging loan. 

Top bridging loan alternatives to explore

If you're looking for an alternative to a bridging loan, your options depend on your circumstances and proposed usage. Some loans are locked to a specific type of venture, such as development finance for property. Others are more general but lack the advantages of a bridge. 

For those reasons, we'd always suggest speaking to Rangewell first. We can help you identify which loan alternatives suit your needs and arrange it for you to help you save time and money. Options include:

• Development finance: this is a loan designed to fund property development projects. The lender will base the loan against the property in question and funds are released in stages as development progresses. This means property development loans are a far slower type of finance compared to a bridging loan but offer better structure and longer-term viability. 
• Mezzanine finance: this refers to a hybrid of debt and equity financing where lenders can convert debt to equity in a building if you fail to repay. Like bridging finance, mezzanine funding can often help 'plug a gap'. 
• Commercial mortgages: a commercial mortgage is a long-term loan that supports property investors. It is raised against the value of residential or commercial property and offers long-term financing. Unlike a bridging loan, you can't expect to raise a commercial mortgage in days so it won't be suitable for short-term opportunities. 
• Business loans: standard commercial loans are a flexible financial product and can be arranged quickly but are heavily dependent on circumstances. Speak to Rangewell if you want to apply. 
• Asset finance: if you're looking to raise funds to purchase equipment, an asset finance loan may be suitable. This is when you raise finance held against the value of the asset, with the lender taking possession if you default. 

Get a bridging loan alternative with Rangewell

If you need fast access to cash for your business but are unsure about a bridging loan, talk to our team today. We can walk you through the alternatives and considerations you’ll need to consider, then help you negotiate a loan that suits your requirements – all without any cost to your business.