Guide to Property Finance
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When it comes to property finance, people and businesses usually feel very lost. Property finance is used to secure funding deals especially for your growing SME. Funding companies in the UK offer various kinds of business loans to start-ups and SMEs. Bridging loans and bridging finance is one option available to the people and businesses but is still a cause for some confusion. Here is a short guide that seeks to provide more information about bridging loan and bridging finances. What are bridging loans?
Bridging finance is a kind of a short term business loan. It is best explained as a temporary loan that helps a business climb from one step to the next. This is until a business can either clear the loan in full or secure a more permanent form of finance. As it forms a finance bridge to get you from one step to another, it is thus termed as bridging finance. How do they compare to regular term loans? As the theory suggests, bridging finance tends to differ from term loans as bridging finances are for short term purpose while term loans often have more general commercial purposes. As a matter of fact, the speed of getting the money in your account is what differentiates the two. In terms of loans, lenders tend to take weeks or even months whereas bridging finance can be ready in 24 to 48 hours. What can you use bridging finance for? Bridging finance is usually used for the purpose of purchasing a property or renovating it (since it is a form of property finance). However, bridging finances are commercial as well as residential, and the works can be ground-up property developments or just the addition of a bathroom to a flat. It can be used for other short term commercial purposes as well, as long as you have a clear exit in place (which mainly depends on what desires the lender has for your plans). What is an ‘exit’? Exit is the terminology used by lenders when they mean to say how a client is going to either clear the bridging loan in full (including the interest costs) or move to a more permanent type of finance such as a term mortgage. You might have come across your lenders using terms such as closed bridging loans and open bridging loans. Closed bridging loans are a line of credit with a fixed exit date in place. On the other hand, open loans are given without an exit but are fixed, thus providing a client with a certain period of time to make repayments. Are there any additional costs with bridging loans? Additional costs on bridging loans are dependent on the circumstances of the loan. In general, there might be a fee for the arrangement of the loan along with administration fees. However, this is bound to vary from lender to lender.
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